Tennessee Gov. Bill Haslam (R) on Jan. 18 unveiled his anticipated transportation funding plan, including provisions to increase the state gas tax by 7 cents-per-gallon and the diesel tax by 12 cents-per-gallon (indexed to the Consumer Price Index, with a ceiling in place), and to raise vehicle registration fees by an average of $5 per vehicle annually. The proposal also creates an annual $100 road user fee on electric vehicles and increases taxes on alternative fuel, as well as a 3 percent charge on rental cars. Additionally, municipalities will be permitted to seek voter approval for a surcharge on their local sales tax to be dedicated to public transit projects. All revenue, including an annual 2 percent diversion to the state’s General Fund, will be dedicated to transportation purposes. Additionally, the governor’s plan transfers $120 million from the General Fund to the Highway Fund to repay previous diversions.
If approved, the plan is expected to generate $278 million annually in new transportation funding for 962 projects throughout the state, plus an additional $39 million to cities and $78 million to counties.
In order to balance the increased transportation funding and offset the increase in user fees, Gov. Haslam proposed reducing the state’s sales tax on groceries by 0.5 percent, decreasing the franchise and excise tax paid by businesses, and cutting the Hall income tax— previously scheduled to be eliminated by 2022— by 3 percent by 2019.
Tennessee last increased the state gas tax in 1989.
Read Gov. Haslam’s statement on the “Improving Manufacturing, Public Roads and Opportunities for a Vibrant Economy” (IMPROVE) Act.
Read the ARTBA-TIAC “2017 State Transportation Funding Developments Predictions” to see why we think Tennessee is likely to pass transportation funding legislation this year, and what other states could potentially increase funding as well.