Tennessee General Assembly Passes Gas, Diesel Tax
You'll be paying more for gasoline and diesel fuel in Tennessee, starting this summer, after Gov. Bill Haslam signs a bill to increase state fuel taxes.
The General Assembly handed Haslam a landmark victory April 20 by approving his plan to fund $10 billion in transportation projects through the first gas-tax increase since 1989. The House voted 60-37 in favor of the IMPROVE Act, and the Senate approved 25-6.
State Sen. Joey Hensley, (R-Hohenwald), and state Rep. Sheila Butt, (R-Columbia) voted no, pointing to a $2 billion surplus already in the state's general fund. State Rep. Michael Curcio, (R-Dickson), favored the legislation. The House and Senate bills differed slightly and will have to be ironed out before landing on the governor's desk.
"It's hard for me to vote for a tax increase when we have this big budget surplus," Hensley told The Daily Herald. "We easily could have funded these projects without raising taxes."
The governor included tax cuts in the legislation in an attempt to win over legislators like Hensley and Butt. The plan also cuts the state's sales tax on groceries, reduces franchise and excises taxes for manufacturers, speeds up the elimination of the Hall Income Tax on some investments and provides property tax relief for eligible disabled veterans and elderly.
"I agreed with all of those tax cuts, but they should have had nothing to do with the gas tax," Hensley said. "The transportation fund has $2 billion in the budget every year, anyway, and this will add another $200 million. They act like this is going to save all of these projects. All of these projects were going to get done. It just would have taken about three years longer without this increase."
Haslam's plan also increases fees, including a $5 car registration hike and a $100 fee on electric cars.
Altogether, the plan will raise an estimated $350 million and increase road revenues shared with cities and counties.
The increase "was absolutely unnecessary at this time," Butt told The Daily Herald. She favored an alternative gas plan offered by state Rep. David Hawk, (R-Greeneville). It would have used portions of taxes collected from the sale of new and used vehicles in the state, instead of a gas tax, to fund the transportation projects. It was favored initially, too, by House Speaker Beth Harwell.
"The state is taking in massive budget surplus dollars, and there was a plan on the table that would not have increased taxes and could have been a steady, dedicated stream of revenue for our infrastructure needs," Butt said. "The IMPROVE Act had tax cuts that mostly will benefit businesses and the wealthy and also increases every vehicle registration fee in Tennessee. The small tax cut on food will be lost in the rising cost of transporting goods and the higher registration fees. Don't think that trucking companies plan to cover those costs without passing them on to consumers.
"People on a limited income will be hurt the most, and it didn't need to happen," she said. "I am proud to say that I and several others stood on the principles and promises on which we campaigned as conservative Republicans. There might be a time that taxes have to be raised for essential needs. But this is not it."
Haslam said the tax cuts balance the burden on taxpayers, pointing to cuts in grocery sales taxes.
"The IMPROVE Act is the largest tax cut in Tennessee history, makes us more competitive as we're recruiting manufacturing jobs and keeps our transportation network safe, reliable and debt-free for the next generation of Tennesseans," Haslam said.
The gas-tax increase will pay for 962 projects in all 95 Tennessee counties. The money will funnel into the state's transportation fund, with four-cent increases on gas and diesel taking effect July 1, shortly after the governor's signs the legislation.
The gas tax, which currently is 21.4 cents per gallon, will rise another penny in 2018 and 2019, until the hike reaches six cents in all. Diesel will go up another three cents the next two years until it reaches 10 cents total.
"The average family of four will save about $2.18 per month," said Rep. Barry Doss, (R-Leoma), one of the bill's sponsors.
Hensley disagreed with that calculation. The average family in his district, which includes Maury, Giles, Lawrence, Lewis, Perry and Wayne counties, likely will pay more, he said.
"It might not be as significant in Maury County, but let's face it, in most of the other counties, people have to drive further to work," Hensley said. "It's going to affect them more."
Harwell voted for the governor's proposal April 20 after efforts to amend legislation failed.
"At the end of the day, infrastructure is a limited role of government, and we need to perform it well," Harwell said.
Lt. Gov. Randy McNally, (R-Oak Ridge), praised the House and Senate.
"The plans passed by the House and Senate today represent a clear and undisputed tax cut for the people of Tennessee — the largest such tax cut in Tennessee history. It is a remarkable achievement," McNally said.
The victory was a major one for Haslam, who also succeeded in passing Tennessee Promise, which offers free tuition for students and adults, earlier in his two terms as governor. He lost in efforts to pass Insure Tennessee, which would have provided health coverage for Tennessee's uninsured.
"We cut a lot of money out of the general fund, going forward, that may hurt sometime in the future, so we'll see," Hensley said. "We have a surplus — $2 billion — that came from steady job growth and cutting taxes. I am a firm believer in cutting taxes to attract businesses and job to our state."
In Butt's opinion, government just has a spending problem and likes to raise taxes "to perpetuate itself," she said.
"Roads are a priority, and every representative understands that, but the alternative plan would have accomplished everything we needed without raising taxes or fees," Butt said. "Also, the federal government is making plans to spend millions on infrastructure. Remember this: Once a tax is put in place you can rest assured, it is never going away."
