NASHVILLE — Republican House Speaker Beth Harwell says she could support some fuel tax increases for new road spending, provided the state's gas and diesel taxes don't exceed the highest rates in the eight surrounding states.
During a Tuesday question-and-answer session with independent business owners, Harwell said "what we need to be careful of is that we never want to have our gas tax higher than the states around us, and never want to have our diesel tax higher than the states around us."
In response to subsequent comments from reporters that Tennessee's existing gas and diesel taxes already exceed some adjoining states' rates, Harwell spokeswoman Kara Owen on Wednesday clarified the speaker's remarks, saying Harwell "was referring to not wanting to be higher than the highest states around us."
That's an important distinction. Haslam is proposing raising the current 21.4-cents-per-gallon gas tax by 7 cents and boosting the existing 18.4 cents on diesel by 12 cents.
According to the American Petroleum Institute, Tennessee's gas tax, which hasn't been raised since 1989, is the third lowest of the nine states when other fuel-based taxes and fees are included.
If Haslam's proposal is approved, which is far from certain, Tennessee's resulting 28.4 cents tax on gas would be the third highest among the states, exceeded only by Georgia (31.1 cents) and North Carolina (34.6 cents).
The speaker's comments Tuesday were Harwell's fullest yet on the fuel tax increase proposal and transportation funding.
Haslam's bill was introduced Tuesday in the form of a "caption" bill with little detail. But the governor, who has already provided public details on what he wants, says he will have a forthcoming amendment to flesh it out in statutory language.
It will include his pledge to cut non-highway taxes to produce a revenue-neutral impact on the overall budget.
Haslam said the increase, which along with increases in vehicle registration fees and other areas would raise an additional $278.5 million, is necessary to tackle an estimated $10.5 billion project backlog more quickly.
Emphasizing Haslam's plan to cut the sales tax on groceries by a half percentage point, cut corporate taxes on manufacturers and speed up a previously approved phase-out of a tax on investment and interest income, Harwell told members of the Tennessee chapter of the National Federation of Independent Business to "keep in mind that our gas tax is a user tax, where if you use it, you pay.
"I'm very much in favor of a sales and user tax form of taxation," added Harwell, who was earlier applauded by NFIB members for successfully pushing elimination of the state's inheritance tax on the wealthy several years ago.
Harwell noted, "We capture a lot of out-of-state dollars [from fuel taxes], because a lot of folks come in and out of our state."
And, she said, "right now we have a lot of room to go up a little bit in our diesel tax, because we are not as high as the states around us, because truckers are going to come through our state regardless and fill up here."
Tennessee's current diesel tax rate is tied with Mississippi as the second lowest among the nine states. If Haslam's proposal were approved, the resulting 30.4 cents per gallon on diesel would make Tennessee's rate the third highest, behind Georgia (34.2 cents) and North Carolina (34.6 cents).
In 2015, Georgia raised fuel taxes and increased or implemented various fees to generate an additional $1 billion annually for its road program. Haslam's plan would result in $278.5 million in new tax and fee revenue to tackle nearly 1,000 transportation projects.
A number of House Republicans agree new money for roads, highways and bridges is needed. But they dislike the idea of fuel tax increases and are pushing to devote a quarter percentage point of the state's existing 7 percent sales tax to transportation.
Haslam's bill faces a major test next week in the House Transportation Subcommittee, where five of the nine members are said to be opposed to his fuel tax hikes. But they appear open on the use of the sales tax, which Haslam argues could get Tennessee into financial trouble in an economic downturn.
Contact Andy Sher at email@example.com or 615-255-0550. Follow him on Twitter @AndySher1.