O'Bannon suspends gasoline sales tax

By Barb Berggoetz and Mary Beth Schneider

June 21, 2000 Web posted at: 11:29 AM EDT (1529 GMT)

INDIANAPOLIS, Indiana (Indianapolis Star) -- Hoosier motorists will get a break at the pump beginning July 1 after Gov. Frank O'Bannon on Tuesday invoked a never-before-used emergency energy law to suspend Indiana's 5 percent sales tax on gasoline.

The step is expected to shave 7 cents to 10 cents off a gallon of gas, depending on the price.

O'Bannon's unusual action, announced against the backdrop of a busy Indianapolis gas station, was lauded as relief by consumers who have been hounded by soaring gas prices of up to $2 a gallon.

The governor said he took action now because "spiraling gas prices have really caused an undue burden" on businesses and citizens.

"Hoosiers can't afford to wait on federal and state investigators to tell us why the Midwest is being hit so hard," he said.

The suspension will be lifted within 60 days only if Indiana's prices drop to rates found in the rest of the country, O'Bannon said.

Arturo Peres, a senior policy specialist with the National Conference of State Legislatures, said Indiana appears to be the first state to reduce or suspend its sales tax on gasoline.

Of the eight other states that charge such a sales tax, he said, Illinois and California have considered suspending it recently but have not taken action.

Some Republicans criticized O'Bannon's suspension of the tax as a political move just months before the gubernatorial election.

"It's politics. It's a political year," said Senate Finance Committee Chairman Lawrence Borst, R-Greenwood. "I think in the long run it probably isn't the correct thing to do."

O'Bannon dismissed the allegation.

"I'm acting as governor for the people of Indiana, and that's the only reason I'm doing this," he said.

House Speaker John Gregg knew some would cry politics.

"This is hurting people's pocketbooks. It's the right thing to do," the Sandborn Democrat said. "If there's a plus side on politics, so be it."

Indiana drivers will save about $12.6 million if the suspension lasts the entire 60-day period allowed under the emergency energy statute.

State legislators passed the law in 1981, after the last big spike in gasoline prices. The governor may declare an emergency for up to 60 days and renew the emergency for an additional 60 days.

State officials aren't concerned about losing the $12.6 million in revenue because higher gas prices have translated into greatly increased tax collections for the state. In the second quarter alone, officials estimated $18 million more was collected than in the same period of 1999.

O'Bannon called on gasoline retailers to pass on the savings to their customers. He warned that the state will be patrolling the pumps, and he asked Attorney General Karen Freeman-Wilson to investigate allegations of consumer fraud.

"We're not out to gouge people," said Jim Jones, manager of the Pilot Travel Center in Mount Comfort.

While he said it would be a corporate decision, he's sure his company and others will pass along the savings. But he predicted that some station owners will try to increase their profits.

Consumers pumping gas Tuesday said they'd gladly take the discount, although some were skeptical that they would ever see it.

At the Speedway gas station at 401 Kentucky Ave., Melissa Titus of Indianapolis has been waiting for weeks for a price cut.

"I keep putting off going to the gas station, hoping the prices will go down, but they only go up," Titus said. "Even 10 cents is good; every cent helps."

Randy Everett, 35, a surgical technician who has a lawn-mowing business on the side, said the high gas prices are "killing me."

"It is terrible. Very expensive. Too expensive," he said, pumping $5 worth of regular for a mere 2.7 gallons.

Columbus resident Amber Pittman said she had hoped O'Bannon would do something about the rising prices.

"It's better than nothing," Pittman said. "But it's still really high, you can tell him that."

Several said they didn't care whether the discount was politically motivated.

"I'm sure it will help him in the polls," said Ryan Clark of Indianapolis. "But, whatever. He gets my vote."

While some politicians looked askance at the suspension, others weren't as quick to criticize.

The Republican who hopes to replace O'Bannon in the governor's office, U.S. Rep. David McIntosh, called O'Bannon's action "the right thing to do."

"I don't want to second-guess him," McIntosh said. "I applaud his decision to do this."

He also urged O'Bannon to join him in calling on President Clinton to lift Environmental Protection Agency regulations that required the oil industry to use a cleaner-burning, reformulated gasoline in certain areas, including Chicago and other parts of the Midwest. That, McIntosh said, is estimated to have added 25 cents of price to each gallon of gasoline.

While McIntosh didn't want to label Tuesday's move as politically motivated, his campaign press secretary, Rob Collins, fired away.

He said O'Bannon's edict was prompted by the upcoming election. And, he said, it was meant to distract public attention from problems The Indianapolis Star revealed in the state's oversight of the transfer of mentally disabled people from private institutions to community homes.

House Minority Leader Paul Mannweiler called O'Bannon's rollback of the gasoline sales tax a nice gesture, but questioned whether it would help Hoosiers all that much.

"That's about $2 per Hoosier," the Indianapolis Republican said.

Mannweiler said he's puzzled that the governor thinks the state can afford to lose $12.6 million in gas revenues when three months ago O'Bannon vetoed several bills that would have cost the state far less money.

"It's like pingpong: Yes we have money, no we don't have money, yes we have money again."

"Phooey," responded Tom New, O'Bannon's campaign manager.

"This has nothing to do with any of that. The governor is going about the business of being governor, as David McIntosh continues to miss votes (in Congress) today while he's here politically in Indiana."

New said O'Bannon spoke late last week to Republican Gov. George Ryan of Illinois about Midwest gasoline prices and took Tuesday's action after investigating legal and procedural issues.

O'Bannon also wrote to the White House asking for a Federal Trade Commission investigation of the soaring pump prices. Not long after O'Bannon announced the sales tax suspension, the FTC announced that it will launch its investigation.

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