Indiana’s second-highest official has thrown his weight behind calls for a sales tax moratorium on utility services — but, even as rates rise, the idea faces a difficult path through the General Assembly.
“People are shouting about this issue more than any other issue right now, as I travel the state,” Lt. Gov. Micah Beckwith told the Capital Chronicle. “… These utility bills, they’re just going through the roof.”
The state’s five investor-owned utilities all charge more than last year — most by double-digit percentages — for the average residential customer using 1,000 kilowatt hours monthly, per an annual regulator survey.
Duke Energy Indiana customers using that amount of energy were paying monthly bills of $156 on July 1, about 20% higher than that day last year. AES Indiana ratepayers owed $158, a 12% year-over-year increase, while Indiana Michigan Power’s households owed $160, just 3% higher.
CenterPoint Energy customers paid significantly more: $221, a 25% hike. And Northern Indiana Public Service Co. ratepayers were charged the most — $234 — with the highest increase since last year: 27%.
The point-in-time survey, conducted by the Indiana Utility Regulatory Commission, doesn’t capture every change. It also doesn’t include the taxes.
Easing up on that, Beckwith said, “would at least give some relief.”
“Now, I don’t think it’s going to fix the problem, but it’s a start,” he added.
Key legislative leaders oppose nixing the sales tax on utility services, however, and past attempts have failed to gain traction at the Statehouse.
Taxes on your service
Indiana imposes a 7% sales tax on the sale of electricity, gas, water and steam by public utilities. It’s the same levy applied to most other taxable transactions, according to the Department of Revenue.
There’s no publicly available data on how much revenue that generates. But about 99.8% of all sales tax earnings — including for utility services — go to the state’s General Fund, spokesman Gus Pearcy said.
There’s some precedent for reducing the tax burden on utility bills.
Hoosier lawmakers repealed the utility receipts tax and complementary utility services use tax in 2022. One was a “quasi-income” tax on a utility’s gross receipts and the other was an excise tax on retail consumption.
“The costs of these taxes were often passed along to consumers,” Pearcy said. “The intent of repealing the (taxes) was to lessen the burden on taxpayers and to help Indiana’s competitiveness from a business standpoint.”
But repeated efforts to exempt utility services from the sales tax, mostly led by Democratic lawmakers, have died without committee hearings.
Hoosiers are still talking about it. That’s what prompted Beckwith to take to X last month and proclaim his support, he said.
“It’s time for Indiana to step up and give our people a break,” he wrote. “I’m calling for a moratorium on STATE TAXES for utility bills until rates return to reasonable levels. Our families deserve relief, not more financial burden. When times are tough, government should lighten the load.”
In the past, then-Gov. Frank O’Bannon suspended collection of the sales tax on gasoline when prices soared in 2000.
Leaders reject
Now, Beckwith’s working on “building a coalition.”
He described floating the idea by lawmakers he trusts, many of whom have been “very receptive.” He hopes to push them into taking the proposal higher, like to a committee chair.
“It doesn’t need to come from the lieutenant governor,” Beckwith said. “It really needs to come from, I think, their fellow House members or their fellow senators. … They’re going to have more sway in the battle inside their caucus than I will.”
And he’ll bring the bully pulpit.
“I’ve got a really big platform that I can use. And I’ll just echo what the people have been telling me,” Beckwith said. “… We’re going to continue to put public pressure on our state officials to get it done.”
The General Assembly’s fiscal leaders, however, are wary.
“Once you start down that path, I can think of a whole lot of things we should not be doing sales tax on,” Rep. Jeff Thompson, who leads the House’s Appropriations Committee, said at a recent tax panel. “And this list is getting longer, as I sit here, and longer and longer. And we’re going from $100 million to $1 billion to — it just grows and grows.”
“Where do you draw that line? That’s the ongoing discussion,” added Thompson, R-Lizton. “Any one (exemption) isolated? Well, maybe not all bad. But … it’s a dangerous path.”
Sen. Travis Holdman, who chairs the Senate’s Tax and Fiscal Policy Committee, was more blunt.
“I just dismiss the discussion to be honest with you,” said Holdman, R-Markle. “… It’s just not doable.”
Ratepayer advocates, however, back the idea.
“That is a reasonable proposal to provide some relief to customers while we figure out the broader picture,” said Kerwin Olson, executive director for the Citizen Action Coalition.
But even then, “it’s a temporary Band-Aid,” he cautioned. “And so, let’s hope that … they spend some time looking at the other root causes and hopefully provide some more meaningful, long-term solutions.”
Indiana Capital Chronicle is part of States Newsroom, a nonprofit news network supported by grants and a coalition of donors as a 501c(3) public charity. Indiana Capital Chronicle maintains editorial independence. Contact Editor Niki Kelly for questions: info@indianacapitalchronicle.com.
