The Tennessee statehouse is addressing a $10.5 billion backlog of road projects.
Gov. Bill Haslam recently released his transportation funding plan, which would raise $344 million annually.
The Republican governor’s plan would increase the state’s 21.4-cent gas rate and 18.4-cent diesel rate to raise $227 million per year for the Tennessee Department of Transportation. The taxes now provide only enough money to cover the cost of road maintenance, but not construction.
To offset some of the crunch on taxpayers’ pocketbooks, Haslam is also asking for state lawmakers to approve $270 million in tax breaks elsewhere, including a half-percent drop in the sales tax collected on groceries. The state now collects 5 percent on every food purchase.
Other tax breaks would include reducing the state’s franchise and excise tax rates.
Haslam says the tax breaks can be offered because of surpluses in other taxes that support the state’s general fund.
Lt. Gov. Randy McNally, R-Oak Ridge, said the governor’s plan “attacks the funding issue in a responsible way.”
“This plan addresses our transportation funding dilemma in a way that makes sense and still reduces the overall tax burden on our citizens,” McNally said in prepared remarks.
The state’s gas tax would be increased by 7 cents to 28.4 cents per gallon. The diesel levy would be raised by 12 cents to 30.4 cents per gallon. The tax rates would also be indexed to the Consumer Price Index to keep up with inflation.
Other components of the governor’s plan include up to $20 more for vehicle registrations, and a new $100 fee on electric vehicles. The fee increases would raise about $50 million annually.
Along with the state’s $227 million in added revenue each year, cities would get an extra $39 million annually and counties would collect $78 million.
Local governments would also be permitted to seek their own road funding through referendums to raise sales taxes.
State lawmakers in the Republican-led legislature are not sold on the governor’s plan. At least half a dozen alternatives are being discussed in both chambers.
One alternative unveiled this week by Rep. David Hawk, R-Greeneville, would avoid a fuel tax increase and use existing revenue available to the state.
Hawk said his plan, which raises about $53 million less, does not have as many “moving parts” as the governor’s plan.
Instead of collecting more taxes, Hawk wants to take a quarter of 1 percent of the state’s 7 percent sales tax that now goes to the general fund and reroute $194 million to the state DOT. Cities and counties would receive $32.5 million and $65 million, respectively.
“My plan gives the legislature another option,” Hawk said at his press conference.
Hawk commended the governor for his work on a transportation plan, and he added that his plan is not intended to be “adversarial.” He said he looks forward to working with the governor in the months ahead to come up with a plan that all lawmakers can support.
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