House Speaker Beth Harwell is greeted by representative of a National Federation of Independent Business after her speech to the group on Nashville on Tuesday, March 1, 2011. (AP Photo/Erik Schelzig)

NASHVILLE — A key state House panel on Wednesday approved an amended version of Gov. Bill Haslam's gas tax proposal but the proposal may slam headlong into an alternative no fuel tax-increase plan being encouraged by Republican Speaker Beth Harwell.

Harwell's spokeswoman, Kara Owen confirmed Harwell has been talking with Assistant Majority Leader David Hawk, R-Greeneville and two other GOP leaders to "develop an alternative that does not include a gas tax increase.


"The details have not been fully developed yet," Owen said in an email, "but they are working diligently to offer something. She [Harwell] knows members have a desire to find a solution for our transportation and infrastructre funding, and and is encouraged by that agreement. As Leader Hawk mentioned in committee, an amendment would be ready by next week's Finance Committee meeting."

Earlier in the day, Hawk, who earlier this session offered an alternative transportation funding plan that avoided gas tax increases by diverting existing sales tax revenues to road improvements, told Budget Subcommittee members that he and Harwell were working on an unspecified alternative.

The panel, chaired by Rep. Gerald McCormick, R-Chattanooga, approved the measure on a voice vote, sending it on to the full Finance Committee.

McCormick later noted he had heard Hawk's comments in the subcommittee but was taken aback at how resistant Harwell evidently is to the fuel tax increase at this late hour in session.

"I think if you want to kill the bill, just come out and try to kill the bill," McCormick said. "And I think that would effectively kill the bill in my opinion."

Harwell, of Nashville, is expected to launch a gubernatorial bid once lawmakers' annual session ends. Haslam, also Republican, is term limited and can't seek a third term.

Haslam's bill, called the IMPROVE Act, would increase gas and diesel taxes by 6 cents and 10 cents per gallon respectively over a three-year period to pump up the state's dedicated highway fund.

Haslam says the money is necessary to help tackle an estimated $10.5 billion interstate, highway and bridge backlog of projects.

At the same time, the bill cuts the state sales tax on groceries from five percent to four percent. It also lowers corporates taxes on manufacturers and continues to phase out the Hall Income Tax on dividend and investment income.

Harwell's position on the governor's bill has been difficult to ascertain throughout the session. But with the bill now in its third committee, any number of Republicans have gone on record in support, saying the tax reductions sufficiently offset the fuel tax increases.

McCormick says most Tennesseans who drive and buy groceries will see a net reduction in taxes.