Tennessee Gov. Haslam's IMPROVE Act comes up for hearing today in House panel

Gov. Bill Haslam speaks to a Republican gathering in Nashville, Tenn., on Monday, Feb. 6, 2017. Haslam announced that Tennessee has been sued for a new rule requiring major out-of-state online retailers to collect sales taxes on items purchased in the state. (AP Photo/Erik Schelzig)

NASHVILLE - Gov. Bill Haslam's proposed IMPROVE Act, which seeks to boost gas and diesel taxes for Tennessee transportation while cutting taxes in other areas, comes up for its first House Transportation Committee hearing today.

But lawmakers won't be asked to vote just yet on the Improving Manufacturing, Public Roads and Opportunities for a Vibrant Economy Act.

Instead, the GOP-controlled panel will be hearing presentations from state Comptroller Justin Wilson, Haslam's senior adviser Stephen Smith, Transportation Commissioner John Schroer and Schroer's No. 2 assistant, Deputy Commissioner Paul Degges.

The hearing comes as Haslam's fellow Republicans in the House pursue alternatives to the governor's proposed 7-cents-per-gallon increase on the current 21.4-cents-per-gallon gas tax and a recommended 12-cents-per-gallon increase to the current 18.4-cents-per-gallon on diesel.

On Wednesday, Haslam's proposal will come before the House Transportation Subcommittee, where members will hear testimony from various administration officials as well as conservative economist Arthur Laffer, who is said not to favor increasing fuel taxes.

Along with the fuel tax increases, the governor's other recommended revenue steps would raise a total of $278.5 million for the state and another $120 million for cities and counties. It's intended to address stagnant funding in Tennessee's dedicated highway fund and begin tackling an estimated $10.5 billion backlog of highway and bridges maintenance and new projects statewide.

At the same time, Haslam is attempting to respond to majority Republicans' concerns about huge surpluses in the state's general fund, which funds most other areas of state government. The state has a $1.1 billion surplus in one-time revenue and an estimated $950 million in recurring revenue, which is about double or more what Tennessee normally can expect to see.

Haslam has proposed cutting $270 million in three areas: Reducing the state's 5 percent sales tax on food sold in grocery stores by a half percentage point, cutting business franchise and excise taxes for job-generating manufacturing companies and accelerating the already planned phase out of the Hall Income Tax on individuals' interest and investment earnings.

But a number of Republicans, especially in the House, are rejecting Haslam's call for the first fuel tax increase in nearly 28 years. Instead, their plan calls for devoting a quarter percentage point of the 7 percent sales tax to roads, a departure from decades of practice in a state that pays for roads as it goes. And, critics contend, a risky one.

Meanwhile, House Republicans and minority Democrats are proposing their own tax cuts, including a $400 professional license fee on doctors, lawyers, accountants and lobbyists, among others.

Others are demanding revenue to relieve local property taxes for veterans and seniors. Some Democrats, whose votes Haslam will need, want to phase out the state's sales tax on food over a decade at a cost of $550 million, with $250 million going into a dedicated fund with money from interest or investments going toward education.

Senate Majority Leader Mark Norris, R-Collierville, told reporters last week some 60 percent of the GOP-dominated General Assembly has never had to deal with a tax proposal. And he warned that while the state is flush with money right now, that won't always be the case.

He said the bill he's introduced on behalf of Haslam is "broad enough to welcome all comers to the well and let them bring forth their amendments along with the governor's bill so we can sort of all sing from the same hymn book."

He also warned that "if you have a number of plans, you don't have any plans."

While some lawmakers are pushing for eliminating the professional privilege tax, Norris questioned how they'll square that when competing interests, such as upset advocates for property tax relief for veterans and the elderly show up in droves.

In other developments Monday:

' Saying that various Republican plans seek to "raid the general fund," Rep. John Ray Clemmons, D-Clemmons, unveiled Memphis Democrat Sen. Sara Kyle's proposal, which relies on more modest increases in gas and diesel and provides additional flexibility to local governments, especially in Middle Tennessee, to raise local money for transportation.

' Tennessee members of the National Federation of Independent Business are giving "decidedly mixed" reviews regarding Republican Gov. Bill Haslam's proposed IMPROVE Act, which seeks an increase in state gas and diesel taxes coupled with tax cuts in non-highway fund sources of revenue.

Jim Brown, NFIB-Tennessee's state director, said in a news release that when members of the independent business group surveyed members this month, "there really was no clear consensus, at least on the question of a tax increase."

Brown said 55 percent of members responding to the survey were opposed to Haslam's call for boosting gas taxes by 7 cents per gallon and diesel by 12 cents. Forty percent said they supported it while 5 percent were undecided.

But survey respondents were more definitive about the proposal to "index" future gas tax increases to changes in the Consumer Price Index, Brown said. Seventy-five percent of respondents oppose, while 19 percent support, and 5 percent are undecided.

The Tennessee Chamber of Commerce previously has said it is supportive of modest fuel tax increase combined with cuts in business taxes affecting manufacturers.

Contact staff writer Andy Sher at asher@timesfreepress.com or 615-255-0550. Follow him on Twitter @AndySher1.