Haslam tax plan partially passes

Xavier Smith • Mar 1, 2017 at 2:05 PM

A portion of Gov. Bill Haslam’s IMPROVE Act will head to the full House Transportation Committee after it passed a subcommittee Wednesday afternoon.

The House Transportation Subcommittee passed a portion of Gov. Bill Haslam’s proposed plan on a 5-4 vote, but amended the governor’s original plans.

The committee approved an amendment to Haslam’s plan that replaces the most scrutinized portion of his gas tax proposal with the proposal of the plan’s leading alternative.

Haslam’s original plans called for an increase to the road user fee or gas tax by 7 cents for a gallon of gas and 12 cents for a gallon of diesel fuel and an increase in car registration fees by $5 for the average passenger vehicle, which is expected to bring in $278 million in new money for backlogged transportation projects.

“This amendment removes the gas tax and the diesel tax and it replaces it with the Hawk amendment language. In other words, it replaces the revenue raised from taxes to sales tax revenue. It leaves all the rest of the bill in tact,” said Rep. David Alexander, R-Winchester.

Rep. David Hawk, R-Greeneville, introduced the plan that would redirect a quarter of 1 percent of sales tax directly to the transportation fund, which should create about $291 million of reoccurring money every single year.

Rep. Jerry Sexton, R-Bean Station, questioned the purpose of adding the Hawk plan to the IMPROVE Act when it was introduced as a separate proposal.

“The IMPROVE Act in everyone’s mind is to raise taxes on gasoline and diesel fuel, along with about five other taxes,” Sexton said. “I don’t understand the purpose of it because we have the same [language] in Rep. Hawk’s bill that we’re going to be voting on a little bit later.”

“There are other parts of the IMPROVE Act, in particular some of those tax cuts, that I like. That’s why,” Alexander said.

Other tax cuts in the IMPROVE Act include a ½-percent cut on grocery sales tax and cuts to business taxes for manufacturers by $113 million by allowing them to go to “single weighted sales factor.”

“If we wanted to, we could take any of those things that we like and make them either a bill on their own or put them on something else. In my opinion, it confuses the bill,” said Sexton, who said he felt the amendment could be dropped in the full transportation committee, and the bill could be left with no alternative.

Prominent economist Art Laffer presented his take on the proposed IMPROVE Act last month during the first day of hearings regarding the potential plan.

“We don’t need more taxation in the state of Tennessee. We don’t. You don’t need to spend everything you get. When I look at the situation here, highway funding does appear to be a very needed activity. That’s true, but we don’t need to raise taxes and cut taxes that are temporary,” Laffer said. “We need to keep our taxes low and when you get extra revenues in, you want to make darn sure that you use those revenues to continue to control taxes.”

Laffer said he believed the state should take aim at reducing the franchise business tax in the state, which he called a job and business killer.

Committee members Courtney Rogers, R-Goodlettsville, chairman Terri Lynn Weaver, R-Lancaster, and John Mark Windle, D-Livingston, joined Sexton in voting against the amended bill.

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