Tennessee Gov. Haslam is expected to seek gas tax hike for $6 billion road project backlog

Tennessee Gov. Haslam is expected to seek gas tax hike for $6 billion road project backlog

Republican lawmakers have demanded governor cut taxes in other areas

January 18th, 2017 by Andy Sher in Politics State

Tennessee Governor Bill Haslam talks about education and his budget to the editorial board at the Times Free Press.

Photo by Tim Barber /Times Free Press.

NASHVILLE — Gov. Bill Haslam plans today to unveil his plan for accelerating Tennessee's economic growth, a proposal state lawmakers expect will include a recommended increase in gas taxes to boost state transportation spending while simultaneously trimming other taxes supporting non-road areas of government.

Other provisions are said to include a first-time fee for electric and propane-fueled vehicles, as well as fees on rental vehicles.

But in his effort to address what he said is a $6 billion backlog in road, highway and bridge projects with the first gas-and-diesel-tax increase since 1989, Haslam is also trying to address concerns raised by tax-increase-wary fellow legislative Republicans.

Majority Republican lawmakers have demanded Haslam cut taxes in other areas that have generated a $1 billion one-time surplus in the general government budget. The state also has an $800 million or so increase in recurring revenues.

Lawmakers expect Haslam will recommend trimming a half cent off Tennessee's 5 percent tax on food, as well as make reductions in some corporate taxes, while accelerating the state portion of the already planned phase-out of the Hall Income Tax on interest and dividends.

Republican leaders have said any fuel tax must be revenue neutral in its net impact on the state's $35 billion budget.

"We can't ignore what are the real needs, the $6 billion backlog," Haslam told reporters last week as the 110th General Assembly convened. But he acknowledged his plan has to be "something that can pass, to be blunt. The best plan in the world isn't any good if it can't pass."

He pointed to $270 million in cuts the state has already made with an additional $170 million in commitments to phase out the Hall tax. Haslam has made a half billion dollars in cuts in state government since he became governor in 2011.

Tennesseans now pay 21.4 cents per gallon on gas and 18.4 cents on diesel. Haslam is expected to recommend a 7 cent increase on gas and 12 cents on diesel, lawmakers and others said.

Despite the expected recommended cuts in some other taxes, lawmakers say raising taxes remains a tough sell.

In fact, this appears to be the first time in Tennessee history that a Republican governor is asking a GOP-controlled Legislature for a tax increase. Meanwhile, Democrats who represent urban areas want something done for public transportation, especially a concern in traffic-choked Nashville.

House Speaker Beth Harwell, R-Nashville, who is looking at running in 2018 to succeed Haslam, told reporters last week that while "supportive of us looking at what needs to be done," the General Assembly "does not take raising taxes lightly.

"So I predict that if we look at increasing the user tax on gas, we will also look at lowering a tax somewhere else."

Newly elected Republican Senate Speaker Randy McNally has said the same regarding offsetting tax cuts. And so has Republican Majority Leader Mark Norris of Collierville, also weighing a gubernatorial bid.

Former House Majority Leader Gerald McCormick, R-Chattanooga, now chairman of the chamber's powerful Budget Subcommittee, is no fan of a gas tax increase and, in mid-2015 when Haslam first started saying new funding was needed, wasn't supportive.

That came shortly after Haslam's fiasco during the 2015 legislative session when his proposed Medicaid-expansion proposal, Insure Tennessee, died twice in Senate committees, once during a special session and again in the regular session.

McCormick told reporters last week he believes cuts to the sales tax should go along with a gas tax increase "so that the poor people can get the tax breaks just as the rich people."

Most of Republicans' tax cuts have benefited wealthier Tennesseans, with the elimination of the inheritance tax and gift taxes, while phasing out the Hall Income Tax on interest and dividends.

The governor did cut the sales tax on groceries from 5.5 percent to 5 percent. And Haslam has publicly voiced concerns over cutting the existing tax base too much, because the national economy will go down at some point and the state should not be left in a financial jam.

Meanwhile, the Tennessee chapter of Americans for Prosperity is expected to oppose Haslam's effort. Executive Director Andy Ogles, whose group joined with other organizations to successfully oppose Insure Tennessee two years ago, later opposed talk of a gas tax that same year.

He told the Times Free Press last week he was holding off judgment until Haslam presented his plan. But asked whether he was for increasing gas taxes, Ogles said "negative."

And on Tuesday, Ogles announced a "Reform America" tour of Tennessee, saying in a news release that "officials need to hear from their constituents on important community issues.

"Our grassroots activists have helped us stop the gas tax, defeat Obamacare expansion [twice] and led the fight to repeal the Hall income tax," Ogles said of past initiatives the group has been involved in.

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