AASHTO Journal

Tennessee Gov. Haslam Unveils Multilayered Plan of Transportation Tax Hikes Plus Tax Cuts

Joined by Tennessee mayors and leaders in the manufacturing and trucking industries, Gov. Bill Haslam proposed a plan to hike various taxes and fees to pay for nearly 1,000 new transportation projects while cutting taxes on food and manufacturing.

Haslam dubbed the plan the "Improve Act," an acronym for "Improving Manufacturing, Public Roads and Opportunities for a Vibrant Economy," and introduced it Jan. 18 as the first piece of his new legislative plan aimed at building economic growth and the state's competitiveness.

His plan would increase motor fuel taxes – what Haslam calls the "road user fee" – for the first time since 1989 by seven cents a gallon for gasoline and 12 cents for diesel fuel, and index them to keep pace with inflation. It would increase registration fees by $5 for the average passenger vehicle, place an annual road user fee on electric vehicles and increase charges for vehicles using alternative fuels.

haslamannounces.jpg Haslam announces his funding proposal.

The proposal includes a 3 percent charge on rental cars and changes the state's open container law to allow the Tennessee Department of Transportation flexibility to use $18 million in existing federal dollars on roads.

The governor estimated those measures would cost the average state motorist about $4 a month but bring in $278 million more for project investments to improve the state's road and bridges and support transit service.

In addition, "All funds would go toward transportation," his announcement said, including 2 percent that typically has reverted to the General Fund, to fund 962 projects across all 95 counties plus another $39 million to be distributed to cities and $78 million to counties.

Haslam said his fiscal 2017-2018 budget proposal would also "use surplus one-time funds to finish repaying the Highway Fund by transferring $120 million from the General Fund" back to TDOT's use.

And his proposal would allow municipalities to hold local referendums in which voters could opt to impose surcharges on their sales tax rates that would be solely dedicated to public transit projects.

Among the projects the proposal would fund are 45 to improve interstate highways, 89 projects to improve access in rural communities, 51 "geared toward creating economic opportunities," and replacements of 162 bridges on state highways and 526 bridges on county roads.

"Under the conservative fiscal leadership of the General Assembly and this administration, state government is smaller, $500 million in recurring costs have been cut out of the state's operating budget, and together we've cut taxes by $270 million annually," Haslam said.

"Because we are a smaller, less tax-reliant state government, it is time to build on the vision of what the future of Tennessee looks like and requires," the governor continued. "This proposal is the next step in the conversation about how we're going to position the state to address expected growth, maintain Tennessee's economic momentum and remain competitive as we continue recruiting high quality jobs."

Haslam said his plan would cut Tennessee's sales tax on groceries another half percent to 4.5 percent, making a total cut to the sales tax on food of 1 percent, or $101 million, during his administration. The proposal calls for changes to make Tennessee's franchise and excise tax on manufacturing businesses more competitive, and reducing a state tax on interest and dividend income from investments.

"We've lowered the cost of government and experienced revenue growth so we're lowering the cost of food and bringing business taxes on manufacturers more in line with our neighbors. At the same time we have to ensure we have a transportation network that is not only highly ranked but also debt-free, just like it was given to us," Haslam said.

"Together these proposed tax cuts and investments will move the state forward and position the next Tennessee for continued growth, prosperity and opportunity for our children and grandchildren," he added.

Questions regarding this article may be directed to editor@aashtojournal.org.

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