House GOP's road funding plan includes tax hike A House Republican proposal would create a long-term funding solution for Indiana roads — but with tax increases.

Tony Cook | IndyStar

Hoosiers could pay more for gas and cigarettes under a road funding proposal being crafted by Indiana House Republican leaders.

The proposal also would provide for a study about turning I-65 and I-70 into toll roads.

House Speaker Brian Bosma provided some details about the proposal during a legislative conference Downtown on Wednesday. The funding plan would index the state's fuel tax to inflation and gradually shift all of the 7 percent sales tax on gasoline to the motor vehicle highway fund, which is used for state and local road projects.

Bosma said the plan would create a sustainable, long-term solution for maintaining Indiana's roads and bridges, but he acknowledged that some would consider it a tax increase.

"It does create an adjustment in the tax," the Indianapolis Republican said. "It’s a user fee. Most Hoosiers realize we’ve got to fund an infrastructure that’s got a lot of wear and tear on it, and they’re willing to do so, according to those I’ve spoken with and surveyed."

The measure will be carried by House Roads and Transportation Committee Chairman Ed Soliday, R-Valparaiso. He said that even with increases to the gas tax, future fuel economy requirements for vehicles make that source only a temporary solution.

That's why the measure also will include a study of the pros and cons of tolling on I-65 and I-70, Soliday said. Those interstates carry a lot of out-of-state traffic and could generate $365 million a year with toll rates similar to those on the Indiana Toll Road, he said.

The state has been struggling to fund its infrastructure in recent years because gas taxes have stagnated as vehicles have become more fuel-efficient. Focus on the issue has intensified in recent months, after the month-long shutdown of a bridge on I-65 near Lafayette and revelations that some state contractors used a faulty asphalt mix that could cause roads to crumble years earlier than expected.

Bosma said indexing the state's 18 cents-a-gallon gasoline tax to the Consumer Price Index and the rise in construction costs going back to 2002 (the last time the tax was increased) would likely result in a 5-cent increase.

As for the 7 percent sales tax on gasoline, only 1 percent of those revenues go to roads. The rest goes into the state's general fund, where it used for other services. Bosma said he wants the entire 7 percent to go into a highway fund used for state and local roads.

To compensate for the loss to the general fund, Bosma and Soliday are looking at increasing a state tax on cigarettes, which they said would go to the state's Medicaid program and free up money in the general fund currently used for that purpose.

"More than 60 percent of our Medicaid expenses in the state are linked to smoking," Bosma said. "If there was an offset with the cigarette tax — which has been discussed — it would be linked directly to Medicaid funding."

The funding proposal will be one of several lawmakers will consider when they convene for the 2016 legislative session in January. Gov. Mike Pence and Democrats in the legislature have proposed different, short-term plans that would not require any immediate tax increases.

Senate Appropriations Chairman Luke Kenley, R-Noblesville, said the proposed tax adjustments would be a tough sell in the legislature, where many Republicans have pledged never to increase taxes.

"This is the challenge we face on a lot of issues in the Indiana General Assembly," he said.

Kenley predicted the debate over road funding would spill over into 2017, when lawmakers will pass a new two-year state budget.

Call Star reporter Tony Cook at (317) 444-6081. Follow him on Twitter: @indystartony.