Tennessee House GOP sends gas tax legislation to Gov. Haslam for final approval

First increase in almost 30 years passes test in Tennessee Legislature

FILE - In this Monday, Jan. 30, 2017, file photo, Gov. Bill Haslam gives his annual State of the State address to a joint convention of the Tennessee General, Assembly in Nashville, Tenn. (AP Photo/Mark Humphrey, File)

NASHVILLE - Tennessee's first gas tax increase in nearly 30 years is headed to Republican Gov. Bill Haslam after the GOP-run House took final action on the legislation Monday night.

Representatives voted 67-21, agreeing to two amendments included by the Senate to the House's previously passed bill.

One amendment included state-funded property tax relief for disabled veterans and the elderly. The other was the effective date of that relief.

"You're not voting for or against the bill itself," Transportation Committee Chairman Barry Doss, R-Leoma, told his colleagues.

While technically correct, the action nonetheless resulted in final approval of Haslam's IMPROVE Act, which raises fuel taxes for the state's dedicated highway fund for the first time since 1989.

Doss' assertion, echoed by a number of fellow Republicans, prompted considerable debate. But in the end, after repeatedly condemning the Senate over its action in including the property tax provisions that gas tax opponents wanted handled separately, the amendments were approved in one fell swoop.

Under the legislation, the gas tax would rise by 6 cents, to 27.4 cents per gallon, and diesel would rise 10 cents, to 28.4 cents per gallon, over the next three years.

The governor said the additional money is needed to start tackling a $10.5 billion backlog involving 962 projects across Tennessee. An estimated $4.5 billion worth of projects otherwise wouldn't be able to come to fruition for decades, Haslam said.

While the bill raises $350 million by year 3 for the state's dedicated highway fund, as well as a share for local governments, it cuts an estimated $400 million in general fund taxes, including a 20 percent reduction in the state's sales tax on groceries, taking it from 5 percent to 4 percent.

Other reductions include a change in corporate taxes for manufacturers and funding to carry out the previously approved phase-out of the Hall Income Tax on stock dividends and interest earnings.

The manufacturers' provision, Haslam and businesses argue, will result in expansions by existing well-paying manufacturers and help lure additional ones. A number of nearby states, including Georgia, use the option that will now be offered in Tennessee.

"The IMPROVE Act is a conservative plan that directly addresses how we fund our roads and bridges for the first time in 30 years," Haslam said. "I thank the General Assembly for passing IMPROVE," singling out for special thanks Senate Majority Leader Mark Norris, R-Collierville, and Reps. Barry Doss, R-Leoma, and Bill Dunn, R-Knoxville, for their work carrying the bill.

House Republican leaders refused to handle the bill, actively opposed it at most critical junctures along the way and sought to fashion an alternative plan that used existing sales taxes on vehicle sales.

The effort - backed by Republican House Speaker Beth Harwell of Nashville, among other GOP leaders - fizzled last week on the House floor.

And now, for the first time since at least post-Civil War Reconstruction days and possibly ever, a Republican governor and a GOP-controlled House and Senate have passed a major tax increase, albeit with the help of minority Democrats.

As amended, the bill headed to Haslam's desk restores the $175,000 exemption on disabled veterans' homes, which was pared down to $100,000 several years ago by Haslam with the aid of legislative Republicans.

House members had standalone bills that sought to restore that and the provisions for seniors, and they were furious over the issue's inclusion in the IMPROVE Act.

Norris said he included raising the veterans' and the seniors' provisions in the bill because he feared Haslam would veto them if handled as a separate bill. The governor has agreed to accept the provisions and the estimated $7 million it would cost the state annually.

As some House Republicans fumed, Majority Leader Glen Casada, R-Franklin, joined others in denouncing the inclusion of various tax cuts and the property tax relief in the bill as more in the line with what Congress does.

"Let's be very careful from this point forward from putting multiple topics on one bill," Casada said. "That's not leadership. That's bribery."

Nonetheless, Casada, who voted against the original bill last week, voted for the amendments. Still, other leaders including GOP Caucus Chairman Ryan Williams of Cookeville and Assistant Majority Leader David Hawk, R-Greeneville, couldn't bring themselves to vote for the final bill. Williams simply didn't cast a vote. Hawk voted no.

On the final vote, the House's 67-21 margin was wider than last week's 60-37 vote on the original bill, with several members accepting arguments that they weren't voting on the actual gas tax increase but the property tax relief provisions.

The transportation portion of the legislation is expected to impact 22 Hamilton County projects totaling $600 million in coming decades, as well as dozens of others in surrounding counties.

Haslam acknowledged Monday night that changes to the original bill, which started off with gas tax increases of 7 cents per gallon and 12 cents per gallon on diesel - as well as elimination of an automatic cost-of-living provision - will result in more time necessary to tackle the sometimes-decades-long timelines on some projects.

But he said he doesn't believe it will be a lengthy delay.

All Hamilton County legislators voted for the final bill.

Projects eligible for funding include $65 million for a long-envisioned major overhaul of the Interstate 75 and I-24 interchange in East Ridge, and the $95 million widening of 8.8 miles of I-75 between Collegedale and exit 20 in Bradley County.

It will also help with the estimated $171 million planned widening of I-24 headed east into downtown Chattanooga. The project starts at the Georgia state line near I-59 and comes through the Lookout Valley section of town. Millions more will go toward major repairs of I-24 bridges starting in downtown and going into Brainerd.

Cities and counties also would get a share of the new revenue. By year three, state estimates show Chattanooga's cut would be $1.64 million higher than now. Hamilton County's share would rise by $1.55 million.

Sales taxes on food will be cut by 20 percent, from 5 percent to 4 percent, and there are changes to alter the calculation of franchise and excise taxes for manufacturers, including Volkswagen and McKee Foods.

Contact Andy Sher at asher@timesfreepress.com or 615-255-0550.