Tennessee House GOP pursues anything-but-gas-tax-increase plans for road funding

Tennessee House GOP pursues anything-but-gas-tax-increase plans for road funding

January 24th, 2017 by Andy Sher in Local Regional News

Traffic moves along Interstate 24 on the afternoon of Dec. 21, 2016.

Photo by Robin Rudd /Times Free Press.

NASHVILLE — Republican Gov. Bill Haslam's proposal to raise Tennessee's gas tax for the first time in more than 27 years is causing a political traffic jam among GOP lawmakers who are competing to offer anything-but-an-increase alternatives.

The state ranks fifth nationwide in terms of years spent with no fuel-levy boost.

Majority House Republicans said there will definitely be several counters to Haslam's proposed Improve Act, which seeks to boost highway funding in a state that has $6 billion in previously approved projects awaiting action and another $4.5 billion in projects on the drawing board, some of which face up to a half-century wait for funding.

Haslam is calling for lawmakers to increase the state's 21.4-cents-per-gallon gax tax by 7 cents to 28.4 cents, while boosting the 18.4-cents-per-gallon diesel tax by 12 cents to 30.4 cents.

Haslam said the fuel tax hikes will generate $227.8 million. Along with several other fee or tax increases, including a $5 increase in vehicle registration fees, the administration projects it would have $278 million more to begin attacking the state's estimated $10.5 billion backlog of road and highway projects that the governor maintains are necessary to keep Tennessee moving forward.

At the same time, to placate fellow Republicans' concerns about surpluses in other taxes that support Tennessee's general fund that pays for most functions outside the highway fund, Haslam has proposed $270 million in cuts.

House Majority Leader Glen Casada, R-Franklin, said "there's a whole host of things being proposed" by his fellow Republicans "to capture $300 million so Tennessee can build more roads."

He predicted that, regardless of how it all shakes out, "we're going to see something come out of the House."

The list includes diverting a portion of the state's 7 percent sales tax — about a quarter percentage point — to transportation funding to replace Haslam's proposal.

But that would depart from a 70-year tradition of Tennessee never using its sales taxes, created in 1947, to support transportation funding. That was the purpose of gas and diesel taxes, created 93 years ago in 1924.

Other plans offered by GOP House lawmakers include diverting a portion of future annual general fund surpluses to transportation. But there's no guarantee that Tennessee will be in the situation it now has with a nearly $1 billion one-time revenue surplus and some $850 million in recurring money.

It's the largest bonanza in state history, and some lawmakers don't think they'll see the likes of it again, even if lawmakers don't cut taxes in other areas.

From the GOP-run Senate's view, Finance Committee Chairman Bo Watson, R-Hixson, said, "I think it's a little bit premature to predict its [proposed gas/diesel tax increase] success or demise.

"I think the governor has included in his proposal a number of things that members have discussed over the course of the past 18 months, frankly," Watson added, noting, "I think most members I've had convervsations with are like me. They're saying, 'Hey, this is a pretty good proposal.'"

But, Watson cautioned, "it's just the first step in a lengthy process, and what ends up being done or not is still a little bit out in the future. I think there are very few members, if any, who don't recognize that we need to do something. But there's still a lot of debate about how we go about paying for it."

In a recent interview, the House's new Budget Subcommittee chairman, Rep. Gerald McCormick, R-Chattanooga, said any cuts should target all Tennesseans.

"I would lean towards sales tax so that the poor people can get the tax breaks just as the rich people," McCormick said.

Rep. David Hawk, R-Greeneville, is trying to find a road that will take additional funding for transportation through the House.

Haslam's plan of gas tax increases and reductions in the sales and corporate taxes, as well as continuing a previously approved move to phase out Tennessee's tax on individuals' investment returns, has proven to be difficult to manage.

The governor branded it the "Improve Act," which he says will keep important infrastructure projects moving for decades, even as it reduces taxes in the corporate excise tax for manufacturers to spur recruitment of new industries and spur expansions by other companies already here.

"One of the concerns that I have is that there are so many moving parts to the governor's proposal and it gives a lot of different groups a chance to poke holes in it," Hawk noted. "Saying that, I'm looking at a simpler plan. I don't have all the numbers and specifics."

Rep. Cameron Sexton, R-Crossville, said "I think it [gas tax increase] will be a tough sell."

House Finance Committee Chairman Charles Sargent, R-Franklin, said he believes Haslam came out "with a well-thought-out plan. I think everyone understands the need to do something on our highway fund.

"I think one of the the best things that people are overlooking is the reduction of the franchise and excise tax to encourage manufacturers," Sargent added. That's about a $113 million cut in state revenues.

"To me," Sargent said, "that is one of the most important components besides the roads."

In an effort to soften opposition that most of this tax cutting doesn't directly impact most Tennesseans, Haslam has proposed cutting the state's 5 percent sales tax on food by half a percentage point to 5 percent. That would cost the state about $55 million annually in revenue.

Rep. Andy Holt, R-Dresden, charged in a recent Facebook post that "for those of you not familiar with legislative gamesmanship, this is an effort to create the opportunity to claim 'Andy Holt voted against cutting taxes on groceries' when I vote against the gas-tax hike."

"We have a massive, and I mean massive budget surplus — projected to be well over $1 billion. This means that we are being overtaxed by that same amount," Holt argued.

According to the Institute on Taxation and Economic Policy, five states have not implemented an increase in their gas tax rates since the 1980s or earlier: Alaska, Oklahoma, Mississippi, South Carolina and Tennessee. That's longer than any of the 45 other states.

Contact Andy Sher at asher@timesfreepress.com or 615-255-0550. Follow him on Twitter @Andy Sher1.