NASHVILLE - Gov. Bill Haslam today unveiled what he calls a comprehensive way to move Tennessee forward that raises new money for transportation through gas and diesel tax increases 7 cents and 12 cents respectively while simultaneously cutting taxes in other areas that benefit Tennesseans and business.

Other provisions of the transportation proposal include indexing fuel prices to the Consumer Price Index every two years but with a cap, increasing car registration fees by $5 for the average vehicle and a 3 percent charge on rental cars.

Tennessee hasn't raised its gas and diesel taxes since 1989. 

Haslam, a Republican, said the average Tennessean would pay roughly $4 extra per month by taking the state's existing 21.4 cent per gallon tax to 28.4 cents and the diesel levy from 18.4 cents per gallon to 30.4 cents.

And in a nod to Tennessee's major cities' needs, the governor's plan would allow municipalities to hold public referendums that, if approved by voters, would allow towns and cities to impose a surcharge on local sales taxes dedicated solely to public transportation.

Flanked by mayors as well as manufacturing leaders from across the Tennessee, Haslam announced what he's calling the IMPROVE Act (Improving Manufacturing, Public Roads and Opportunities for a Vibrant Economy" at a state Capitol news conference.

He said it is just the first step in a combination of proposals he will present aimed at building and sustaining economic growth and the state's competitiveness "for the next generation of Tennesseans."

Haslam said the proposal would bring in an estimated $278 million annually in new dollars to the state for road, highway and bridge maintenance, improvements and new construction.

But it also would cut $270 million in taxes affecting general government. 

That's a nod to fellow Republicans in the General Assembly who say that given the state's nearly $1.9 billion projected surplus - $1 billion of which is in one-time money - any Haslam proposal should be revenue neutral in terms of the overall $35 billion budget.

Proposed cuts include reducing the state's current 5.5 percent sales tax on food to 5 percent at a cost of $55 million to the state, reducing state franchise and excise taxes on corporations through a $113 million change in a formula and accelerating the previously made decision to eliminate the Hall Income Tax on interest and dividends by $102 million in his proposed budget.

Haslam noted that since he took office, the state has already cut $270 million in taxes and also cut state government to the tune of a half billion dollars.

Regarding the proposed fuel tax increases, administration figures show that cities and counties would see an additional $85.21 million a year with $56.81 million from gas and $28.4 million from diesel. 

Collectively, the state funds would allow the state to accelerate a total of 962 projects across Tennessee's 95 counties.

The state has an estimated $6 billion backlog of previously approved projects and Haslam says 94 percent of those would be under construction within six years. Fifty-six of interstate projects would be under construction during the time frame. 

Forty-five projects would improve interstates in Tennessee.