Governor Bill Haslam on Wednesday proposed Tennessee's first gas tax hike in 27 years to fund the state’s road building and maintenance program but State Representative Mark Pody is not sold on it.
Under the Governor’s plan, the state gas tax would increase by seven cents from 21.4 cents per gallon to 28.4 cents. The tax on diesel would increase by 12 cents per gallon. The IMPROVE Act would increase car registration fees by $5 for the average passenger vehicle. It places an annual road user fee on electric vehicles and increases charges on vehicles using alternative fuels. The proposal also 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. Fuel taxes would be indexed – but also capped – to the Consumer Price Index in order to keep up with the rate of inflation.
The Governor said the state’s $6 billion backlog in transportation projects should spur legislators into action. Haslam's plan would generate about $278 million per year in new transportation funding, while at the same time cutting about $270 million in taxes for shoppers buying groceries, manufacturing companies investing in the state and people earning income from stocks and bonds.
Speaking with WJLE during a visit to Smithville Friday, Pody said while he agrees the transportation department needs more funding, he believes there are better alternatives.
“I am very excited that they are tackling the transportation funding issue. We have to find a way to put more money into TDOT. If I had to pick a number it would have been closer to $400 million per year in dedicated funding (we need). The proposal he (Governor) has isn’t going to be quite that much. But if that is what he feels comfortable with then I am good with that. The question is “how are we going to fund it”? He is proposing that we put a seven cent gas increase per gallon and twelve cents per gallon on diesel. I would rather readjust the taxes. For example, if we just took the people that are using the roads in all sources, when you get your oil changed or buy a tire, or buying a used car, take the sales tax we’re using on that and put that into the department of transportation. If we do it with just the gas tax it doesn’t affect anybody who is using electric or using natural gas. He says we’ll put another fee on those people. I’m not really big on just doing fees because we’re only going to kick this problem down the road. Let’s take a dedicated tax revenue source we already have so it comes out of the general fund, and we have an almost 2 billion dollar surplus there, and dedicate that toward TDOT. That can be easily done without a tax increase. I’m in full agreement with the Governor that we need to put more money in. It’s just where that source is going to come from,” said Representative Pody.
The IMPROVE Act cuts the sales tax on groceries another .50 percent ($55 million) to 4.5 percent, making a total cut to the sales tax on food of 1 percent, or $101 million, during Haslam’s administration; makes Tennessee’s franchise and excise tax on manufacturing businesses more competitive by allowing companies to go to a “single weighted sales factor” ($113 million); and cuts the Hall income tax 1.5 percent this year with a commitment to cut it another 1.5 percent next year (3 percent, $102 million) – a tax that is statutorily required to be eliminated by 2022 but without a specific schedule to do so. IMPROVE cuts taxes by an estimated $270 million annually, bringing the total number of cuts made and proposed since 2011 to $540 million annually, roughly nine times more than any other administration.
Pody said while he likes the idea of further tax cuts, the state must make sure it’s obligations are met first. “Returns lately in the stock market have been good but last year and the year before they really haven’t been as well. Therefore the Tennessee Consolidated Retirement System state retirement program didn’t get the rate of return anticipated. We have to make sure we fully fund that as well. We have to make sure the Basic Education Program (BEP) is fully funded.”
“We already voted to get rid of the Hall’s Income Tax over the next few years and he wants to cut 1.5% of that right now. I would rather see us make our commitments fulfilled before we do another decrease on something else. We’ve already made a commitment to cut 5% and he is only cutting it by 1.5%. Before we propose another tax decrease, let’s fulfill the agreements and promises we’ve made to Tennessee by cutting what we have already promised. Once that is done, if there is more money left over next year then go ahead and take the next cuts we can do. But don’t keep cutting taxes until we have fulfilled promises we’ve made to Tennesseans first. I think that is very important because I don’t want to be caught down the road if we have a downturn. Let’s do all our promises first before we look at additional tax cuts. I’m all for tax cuts but it’s got to be step by step. I think we can do better than what he is proposing,” Representative Pody said.
The IMPROVE Act would bring in $278 million in new dollars to the state for projects and all funds would go toward transportation, including the 2 percent typically reverted to the General Fund, to provide funding for 962 projects across all 95 counties plus an additional $39 million to cities and $78 million to counties. The legislation would also allow municipalities, only if approved by local voters through referendum, to impose a surcharge on their sales tax rate that would be solely dedicated to public transit projects.
The governor added that his FY 2017-2018 budget proposal would use surplus one-time funds to finish repaying the Highway Fund by transferring $120 million from the General Fund.
Additional pieces of the governor’s NextTennessee plan will be announced in the coming weeks. Haslam is scheduled to deliver his annual State of the State address on January 30.