Gas tax bill easily clears finance panel

NASHVILLE — Gov. Bill Haslam’s proposed gas tax zipped through Tennessee’s Senate Finance Committee on Wednesday on a 10-1 vote — a stark contrast to the House, where it had to battle through opposition from Speaker Beth Harwell and her allies on Tuesday.

Senators voted 10-1 for the Republican governor’s IMPROVE Act, with Sen. Joey Hensley, R-Hohenwald, the lone member voting no.

Both the House and Senate bills, which differ in some respects, could be on the floor next week, with the House version possibly coming to the floor as early as Monday, House Finance Committee Chairman Charles Sargent, R-Franklin, said.

The bill would raise over a three-year period Tennessee’s gas tax by 6 cents per gallon and diesel by 10 cents per gallon, providing what proponents say is a necessary injection of new money into the state’s standalone highway fund for Tennessee road and bridge projects.

It also includes more road revenues for cities and counties.

But the bill also provides for a 20 percent cut in the state’s 5 percent sales tax on groceries, amounting to a $125 million reduction.

It reworks state business franchise and excise taxes to encourage existing manufacturers to expand here and new companies to relocate to Tennessee. Yet another provision puts up $55 million to continue the phase-out of the Hall Tax on individuals’ investment income.

It also includes a revised provision allowing the state’s 12 largest counties and their municipalities to push for new local option taxes to pay for mass transit. Any measure, however, would have to be approved by voters in a referendum.

The Senate version has a provision restoring some state-funded property tax relief for veterans and seniors. The House version does not because critics demanded it be done in a separate bill.

During Wednesday’s Senate proceedings, Senate Majority Leader Mark Norris, R-Collierville, who pushed for the tax cut provisions, told colleagues that “We transformed what the administration formerly proposed from a bill that was revenue neutral … to perhaps the largest single tax cut in state history.”

Norris said that justifies the House adding a second title to the would-be law — “The Tax Cut of 2017.”

He waved a $20 bill to illustrate the financial benefit of tax cuts for the average Tennesseans over fuel tax increases if the legislation becomes law.

“We’re on such a roll,” Norris said. “If you don’t do this and you raid the general fund instead, forget it.”

Hensley, who voted no, said he backed using general fund revenues as opposed to supporting Tennessee’s first fueltax increase since 1989. The state is running a $1 billion surplus in its general fund that pays for most state operations outside the highway fund.

Among those voting for the bill were Finance Committee Chairman Bo Watson, R-Hixson, and Sen. Todd Gardenhire, R-Chattanooga.

Watson said that in addition to providing new money for roads locally, the business tax change that would benefit 518 companies is important statewide and “critical” locally.

Collegedale-based McKee Foods moved a planned expansion to its Virginia operation because of the tax hit it faced if the expansion were done in Tennessee.

“We don’t need to have great, private employers going to another state over that,” Watson said, adding, “for many of us, that’s just an essential part of the act.”

Hensley’s position of turning to existing general fund revenues for road funding is also the position of House Republican Speaker Beth Harwell and some top House leaders.

Their opposition, as well as that of hard-right GOP members, has resulted in a sometimes pothole-marked path on the bill in the lower chamber.

A rival provision backed by Harwell — which supporters wanted to put onto the bill in House Finance on Tuesday but withdrew because they didn’t have the votes — sought to divert existing sales tax revenues from new and used car purchases.

Critics argue it places the tax burden entirely on Tennesseans, because many out-of-state travelers, especially truckers, help pay for state roads every time they buy fuel here.

The same sales-tax amendment is expected to resurface on the House floor.

Earlier this week, the 73-member House GOP Caucus was decidedly divided on the gas tax. In a straw vote, 37 members were opposed to the increase, 30 supported it, two voted present and four apparently walked off with the popsicle sticks they were given to use in the anonymous straw poll.

“In light of the caucus vote, I think it would be wise to offer an alternative to the members in order to keep this important conversation of infrastructure funding moving forward,” Harwell said in a later statement.

Haslam says the bill is needed to address an estimated $6 billion of previously approved transportation projects along with some $4.5 billion in needs the state won’t be able to address for decades without new money.

The bill specifically lists 962 projects, including hundreds of millions of dollars worth of major projects in the Chattanooga area.