(INDIANAPOLIS) - Rising energy costs are putting new pressure on Indiana lawmakers, with bipartisan legislation emerging to eliminate the state's 7% sales tax on utility bills, a move supporters say would provide immediate relief for Hoosier families.
According to reporting by the Indiana Business Journal, the proposal has drawn rare support from both sides of the aisle. Sen. Michael Young, R-Indianapolis, and Rep. Justin Moed, D-Indianapolis, filed separate bills Monday aimed at ending the tax on residential utility purchases.
If fully implemented, the change could save consumers an average of $157 per year on electric bills, based on July 2025 pricing data. Democrats say some households could see savings as high as $350 annually, depending on usage.
Indiana currently applies its 7% sales tax to electricity, gas, water, and steam, treating energy like any other retail purchase. More than 99% of sales tax revenue flows into the state's general fund, making the proposal costly for state finances.
Legislative analysts estimate eliminating the tax could reduce state revenue by $450 million to $720 million, depending on how quickly it is phased out. Moed's House Bill 1213 would repeal the tax outright starting July 1, while Young's Senate Bill 184 would phase it out over four years beginning in 2028.
Young said his own summer electric bills helped motivate the proposal, arguing utilities should be treated as basic necessities, similar to food and medicine, which are exempt from sales tax.
General Assembly leadership remains skeptical. House Speaker Todd Huston, R-Fishers, warned that removing the tax could open the door to new spending demands, creating budget pressure. Senate Tax and Fiscal Policy Committee Chair Sen. Travis Holdman has previously called the idea "not doable."
House Democrats, however, say the tax cut would offer immediate relief while longer-term utility reforms take effect. Rep. Matt Pierce, D-Bloomington, said eliminating the tax would instantly lower bills by 7%.
The proposal has also gained support from Lt. Gov. Micah Beckwith, who has publicly called for a temporary moratorium on state taxes applied to utility bills.
Indiana lawmakers previously repealed the utility receipts tax in 2022, removing an additional 1.46% charge from energy bills. Whether the sales tax proposal advances remains uncertain, and sponsors acknowledge it may face an uphill battle in committee.