Divisive bid to strip gas tax hike from road funding fizzles in House

Friday, April 7, 2017, Vol. 41, No. 14
By Sam Stockard

Gov. Bill Haslam’s transportation funding/tax cut bill raced ahead of a measure backed by House Speaker Beth Harwell in the House Finance, Ways and Means Committee on Tuesday. But the battle isn’t done.

After two meeting breaks, the panel opted for a fuel-tax increase plan to pay for $10.5 billion in road and bridge projects over the next 12 years, softened by a combination of cuts in business, Hall income and food taxes. The bill moves next to the Calendar and Rules Committee, then to the House floor.

“We’ve got an issue that’s fracturing many of us down here, and we’re hanging tax cuts on this bill like it’s a Christmas tree,” said Rep. David Hawk, after withdrawing an alternative he crafted with Harwell.

Hawk opted to drop his proposal, which would have taken about $300 million in general fund money mainly from the sales tax on vehicles, after Rep. Gerald McCormick called for a move to table Hawk’s amendment, a procedure that would have meant its death. Instead, it remains alive for him to bring back to the House floor, which he promised to do in some form.

McCormick argued against the Hawk-Harwell plan, saying it would rewrite the governor’s legislation and remove all of the tax cuts for groceries, the Hall income tax and franchise and excise taxes, which he said are critical to keeping manufacturing jobs and luring new companies.

“It will go back to placing the burden on Tennesseans instead of out-of-state,” McCormick added, noting the use of vehicles sales tax would hit state residents who buy cars and trucks instead of those who drive through the state and fill up at the pump, as well as trucking companies.

Hawk, a Greeneville Republican, said he worked with Harwell over the previous week to come up with a proposal to fund transportation without using the state’s $1 billion surplus. It would take 75 percent of the sales tax on new and used cars, a $5 increase in vehicle registration fees in addition to fees on electric and hybrid cars to come up with $300 for transportation projects.

“We are simply reallocating recurring, historically stable general fund dollars to better fund transportation needs,” Hawk said.

But McCormick and Rep. Charles Sargent pointed out it such a move would take $300 million from the budget and could delay completion of the governor’s $37 billion budget plan in the finance committee.

Talk also surfaced about another Harwell proposal that could be tacked onto the bill in the Calendar and Rules Committee if the measure were to be sent there. House Minority Leader Craig Fitzhugh sought more time for the Democratic Caucus to study the matter.

But Harwell spokeswoman Kara Owen said the speaker had not been working on any other proposal.

Hawk and a number of conservative Republicans contend the governor’s tax cuts do nothing to improve transportation funding, and they believe the two matters should be separate.

“Essentially what we’re being asked to do, we’re telling our constituents, alright, I’m going to take a dollar out of your left pocket and I’m gonna put a dollar in your right pocket,” Hawk said.

The state’s motor fuel taxes have been deemed “faulty,” he said, pointing out gas-tax revenues have grown by 8.28 percent since 2005 while diesel-tax revenues have fallen a third of 1 percent. At the same time, the sales-tax revenue from vehicle sales has grown nearly 30 percent, he said.

Gov. Haslam’s IMPROVE Act, also dubbed the 2017 Tax Cut Act, which is being ferried by Rep. Barry Doss through the House, calls for a three-year phase-in of six cents on the gas tax, pushing it to 27.4 cents per gallon and 10 cents more on the diesel tax, raising it to 28.4 cents per gallon. In addition, it would place a $100 fee on electric cars, add $5 to the state’s vehicle registration fee and give local governments the option to raise a set of six taxes to pay for mass transit projects through voter referendum.

Hawk’s plan would delete the local option to raise taxes, McCormick pointed out. That has been a big selling point for Shelby County lawmakers who want to be able raise funds to buy more city buses.

To offset those fuel and vehicle fee increases, Doss, a Lawrence County Republican, reminded lawmakers of decreases proposed for franchise and excise taxes on manufacturers, a move to expedite cuts in the Hall tax by 1 percent in the next two years, as well as a 1 percent reduction in the food tax, to 4 percent from 5 percent.

In full effect, the state would be cutting taxes by $400 million and raising fuel taxes and fees by only $350 million, he said.

“It’s a very fiscally responsible plan,” Doss said.

Sam Stockard can be reached at sstockard@gmail.com.