Democrats Must Embrace Elimination of Gasoline Sales Tax - Part 2: A Political Perspective
Posted by Jeff Pruitt - 7/7/08 @ 10:00 am - Filed Under 2008 Local Elections, Featured, State Politics
In Part 1 I covered the basic idea of suspending the gasoline tax and how it would not only benefit consumers but also remain revenue neutral to the state. Now I’ll outline how Democrats can use this issue as a political tool to gain traction against Governor Mitch Daniels.
Let’s just start by being completely honest - Daniels won the property tax debate in a major way. One can argue the merits of his plan but right now it’s popular with homeowners and will likely continue to be so through the November elections as more and more people open their new property tax bills. Daniels will continue to push the message that he’s the governor that tackles the big problems while putting money back into taxpayers’ pockets.
So the problem facing Democrats is how can they change that narrative? Democratic gubernatorial nominee Jill Long-Thompson’s plan to suspend the sales tax on gasoline provides that opportunity if they craft the correct message.
First, this gives Democrats an opportunity to complete a campaign promise made in 2006 when they said they would eliminate the sales tax on gasoline - a promise they broke. The fear at the time was a massive loss in revenue but recent data now suggests that analysis was incorrect; the tax can be eliminated and remain revenue neutral.
Second, Indiana is one of only 8 states that has a sales tax on gasoline. Is there a legitimate reason that 42 other states have figured out how to eliminate this tax and we cannot? The answer is no.
Finally, this will put the Daniels administration, and Republicans statewide, in the precarious position of having to come out against the repeal of a tax. The message here is quite simple - Daniels simply shifted the tax burden from one group to another while Democrats want to provide real tax relief.
Tell the people that not only will it put more money in their pockets but it’s fiscally responsible as well. Tell them that although it’s not a massive savings we understand every little bit helps in today’s economy - one that Governor Daniels has failed to rebuild. Explain that this is the first of many proposals from a Long-Thompson administration that is committed to fiscal responsibility and respect for taxpayers.
Remind them that Daniels increased the sales tax on gasoline and Democrats want to repeal it. Make Daniels try to explain why the state needs that money more than the taxpayers do and then hit back with real data to rebut his talking points.
Most importantly, this is how Democrats change the narrative. They must get voters to stop thinking about Daniels the property tax reformer and start asking why he won’t repeal the sales tax on gasoline. Democrats can push the narrative that if he’s this unwilling to repeal a tax that won’t hurt the state’s budget then how can we trust him to what’s fiscally responsible in the future. Again, bring up his ridiculous predictions on the cost of the Iraq war to show a pattern of miscalculations.
Is this the perfect issue to fight Daniels with? No, Democrats missed that boat during the property tax debate as they could’ve buried Daniels had they come up with their own solution. But right now this is the best chance they have to try and win back some of the political ground on taxes and fiscal responsibility. And the best part is that not only is it good politics but sound policy as well. This isn’t just political pandering - it’s the right thing to do…
Comments
6 Responses to “Democrats Must Embrace Elimination of Gasoline Sales Tax - Part 2: A Political Perspective”
Leave a Reply
Jeff,
This policy seems good in theory, but doesn’t it rely on the idea that the savings meant for the taxpayer actually get passed on to them? I just find it hard to believe that I could wake up the morning after this policy took effect and see a 7% drop in prices at the pump. How would we prevent gas station owners from keeping their prices the same and just reaping the benefits themselves?
Jeff, I posted a response at http://www.fortwaynenews.com
Justin,
The price of gasoline is set by factors well outside of the sales tax. Currently you will pay sales tax on the price of gasoline no matter what. If the sales tax is repealed the price of gasoline will still continue to fluctuate but you will not pay the sales tax.
Furthermore, your question seems impossible to answer as it would require all other factors except the sales tax to remain constant in order to measure the effect.
However, given the complex nature of the commodity market and the volatility in fuel prices I highly doubt the state sales tax has any impact in setting the gasoline price point…
I guess my point was that the amount that the state would lose through this policy is not equal to the benefit that taxpayers would gain. It seems possible that the most practical way for taxpayers to benefit would be through a tax rebate so that gas stations(oil companies) would not be the beneficiaries.
I think a question that needs answered is how Indiana’s gas prices are on par with the national average considering that they have a 7% tax added on. It seems practical that the 8 states that charge the sales tax would have higher gas prices than the rest of the country….
Justin,
Your point is quite valid and would have to be explored. The truth is that is that if the Indiana Sales Tax on gasoline were rescinded the gas companies would set their prices higher… All of the savings would not go to the consumer…
Jeff,
Politically this would be a winning issue for Democrats if they could solve the revenue shortfall it would create.
Mike Sylvester
I’ve read both parts to the elimination of Indiana gas sales 7% tax. Should we be looking at a short term suspension of mandated Federal, State, Local excise gas tax that comprises .48 cents per gallon of gas, instead
of a 7% sales tax on every dollar.
We are leasing the toll road to pay for major highway road construction through-out Indiana and it seems to be working. We are taking care of our infastructure much better than most states. It’s probably due to population Federal highway road use.
Or should we look at key factors:
1. Educate the public on independent gas consumption.
2. Eliminate seasonal gas blends.
3. Open up gas exploration resources in our own country…we have the technology now to pull gas, oil, coal, safe nuclear energy options and
water hydropower to create Hydroelectricity.
4. Allow new refineries to be built.
5. Allow free enterprise.
It’s 30 years of no energy solutions, yet the innovations are within our grasp.
Our future needs a National Security Plan focused
on energy and thoughtful economics.