Haslam proposes 7 cent increase to Tennessee gas tax

NASHVILLE (WATE) – Governor Bill Haslam unveiled his plan to boost transportation funding in Tennessee and to address the state’s $5 billion road project backlog.

In the plan, Governor Haslam proposes a seven cent increase to the gas tax and a 12 cent increase to diesel tax per gallon. He would also increase the registration fee for cars by five dollars and then an incremental increase for larger vehicles.

“To the average citizen, what would it mean? It would mean about four dollars a month in increased fuel cost,” said Haslam. The governor also proposed a yearly $100 fee for electric cars and a three percent fee for rental cars.

In order to offset the gas increase, Haslam said he would like to also cut sales tax on groceries by half a percent. He would also change the open container law in Tennessee.

“Right now Tennessee is one of 13 states that don’t have a bill that prohibits an open container of alcohol in the vehicle. Because of that, the federal government basically penalizes $18 million that we can’t use on roads, that has to be used in other places,” said Haslam. “We’re proposing we pass an open container law and that $18 million could stay with roads.”

Tennessee Department of Transportation said that extra funding would help complete 962 projects in all 95 counties.

haslam transportation proposal

“I’m also proposing that we index that, so we don’t again get so quickly back into the position we are in now. With that being tied to the CPI, but with a cap to it. It would be indexed every two years so I think it would be indexed like other taxes are now,” said Haslam.

More online: List of TDOT projects on backlog [PDF]

While some lawmakers have been sympathetic to Haslam’s arguments, many are wary about committing to the state’s first gas hike since 1989 – especially with a budget surplus exceeding $1 billion. Haslam is keen to avoid the pitfalls of his Insure Tennessee that failed in 2015 when he couldn’t secure the support of key Republican legislative leaders like House Speaker Beth Harwell of Nashville and Senate Majority Leader Mark Norris of Collierville. Both are considering bids to succeed the term-limited governor next year.

Harwell said she’s “supportive of us looking at what needs to be done” on transportation needs, but indicated she will expect the governor’s plan to include commensurate tax cut.

“This General Assembly does not take raising taxes lightly,” Harwell said. “So I predict that if we look at increasing the user tax on gas, we will also look at lowering a tax somewhere else.”

Rep. Gerald McCormick, a Chattanooga Republican who has been a vocal opponent of any increase in the gas tax, has been named chairman of the powerful House Finance Subcommittee after stepping down as majority leader before this session. McCormick said he’d want to see the governor propose a cut in the sales tax to go along with a gas tax increase, “so that the poor people can get the tax breaks just as the rich people.”

Most of the tax cuts during the Haslam administration have benefited wealthier Tennesseans, like the phasing out the tax on income from stocks and bonds and the elimination of inheritance and gift taxes. Early in Haslam’s first term, he also cut the sales tax on groceries from 5.5 percent to 5 percent. McCormick said he won’t seek to become a roadblock to Haslam’s transportation plan.

“I’m not looking to sabotage it or anything like that,” he said. “But again I think the burden should fall on the governor.”

State Sen. Richard Briggs says lawmakers have some big decisions to make.

“I don’t think it was a surprise that something was going to be proposed,” said Briggs. “But now we finally have something on the table to talk about.”

He and Rep. Eddie Smith are in favor of the tax cuts in the bill.

“As a conservative republican, I like some of the tax cuts he was talking about,” said Briggs.

“Right now the state grocery tax is at 5 percent so lowering that to 4.5 or even if we could get it down to 4 percent because everybody in the state pays the grocery tax,” said Smith. “You buy milk and bread, everybody in the state does.”

When it comes down to it, would these law makers vote yes on the governor’s proposal?

“I have not taken a stand on whether I will vote for any type of gas tax or diesel tax,” said Briggs. “But I do know that we need to do something.”

“I’m not ready to say I’ll vote for it because the devil is always in the details and that’s where I want to get in and start looking at the language,” said Smith.

The state chapter of Americans for Prosperity, a familiar Haslam foe from the Insure Tennessee debate, is expected to take a prominent role in the gas tax debate. Andrew Ogles, the group’s state director, has pledged to keep an open mind about the governor’s proposal, but questioned the need to for a tax hike when the state is flush with cash.

“I believe in funding our roads, but we don’t have to do it in such a way that we raise taxes,” he said.

The Tennessee Transportation Coalition, a grassroots initiative of the Tennessee Public Transportation Association, said they met with Govenor Haslam’s staff last week to deliver more than 1,000 petitions from residents from more than 60 counties throughout the state and a letter signed by seven partner organizations, including AARP Tennessee, Tennessee Association of Human Resource Agencies, Tennessee Disability Coalition, Tennessee Public Health Association, Tennessee Public Transportation Association, Transit Alliance of Middle Tennessee and Walk Bike Tennessee.

“We’re encouraged that Governor Haslam’s proposal includes a local funding option to give communities the tools to finance their own projects,” said Jason Spain, executive director of the Tennessee Public Transportation Association (TPTA). “However, in some regions of the state, particularly our rural areas, raising additional revenue locally isn’t a viable option. We would like to see the state invest the necessary resources to improve public transportation statewide. Public transit is a growing choice in our state; but it is also a necessity for many Tennesseans in both our rural and urban areas who rely on it for access to jobs, schools and everyday services like medical appointments.”

Knox County Mayor Tim Burchett issued a statement saying: “The governor’s proposal is now in the hands of the Tennessee General Assembly, and I trust the legislature to make an informed decision. With a $10 billion backlog of road projects and nearly $2 billion in surplus, the Governor, state officials and the legislature should communicate clearly and honestly, and continue seeking input from their constituents. Tennessee’s roads are the envy of the nation, and that’s due in large part because of our pay-as-we-go process for funding infrastructure. While our state’s surpluses are significant and the result of good fiscal management, they are mostly made up of one-time money. As I’ve said for years, using one-time money to fund ongoing expenses is like borrowing money to pay your rent; it’s not a good idea. The governor and the legislature are in a difficult position, and I hope whatever decision they make is based on sound conservative principles.”

Knoxville Mayor Madeline Rogero also issued a statement: “”We are glad to see Governor Haslam’s proposal to address serious transportation infrastructure needs in Knoxville and across the state. Investment in infrastructure is crucial to our quality of life and continued growth.”

The Associated Press contributed to this report.

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