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VOL. 132 | NO. 70 | Friday, April 7, 2017

IMPROVE Act Could be Renamed; Alternative Plan in the Works

By Sam Stockard

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Legislation containing a gas-tax increase moved out of a key committee Wednesday, April 5, with proponents saying it could be called the IMPROVE Act or the 2017 Tax Cut Act because of several tax reductions designed to make it easier for Tennesseans to swallow.

BETH HARWELL

But it might have to compete with a proposal being weighed by House Speaker Beth Harwell floated by Rep. David Hawk, who told committee members he is working on an alternative to raising the gas tax.

Harwell’s spokeswoman Kara Owen confirmed Wednesday evening the speaker is talking to Hawk, Rep. Ryan Williams and Speaker Pro Tem Curtis Johnson on an alternative that doesn’t include a gas-tax increase.

“The details have not been fully developed yet, but they are working diligently to offer something,” Owen said. “She knows members have a desire to find a solution for our transportation and infrastructure funding and is encouraged by that agreement.”

As Hawk mentioned in the committee, an amendment would be ready by next week’s meeting of the Finance, Ways and Means Committee.

Hawk said after the meeting, “The plan we are working on now will better our transportation needs across the state of Tennessee through existing resources, to a degree. We have an economic situation in Tennessee that many folks do not believe creates the need to increase taxes to the degree that we’ve seen in some of the plans before us.”

Such a proposal would go head-to-head with the governor’s bill, which emerged Wednesday from the House Finance, Ways and Means Subcommittee, which sent the bill to its full committee after stripping it of a measure increasing property tax relief for veterans and the elderly.

The committee approved a separate bill with those measures in it allowing a property tax break for veterans on a valuation up to $135,000 and for seniors up to $27,000.

Asked why the bill could get a new name, Rep. Gerald McCormick said the change is needed because of “misinformation” calling it a “big tax increase.”

GERALD McCORMICK

“And we’re hearing from people saying, ‘Why are you increasing our taxes?’ when in fact it’s a net tax decrease,” McCormick said afterward. “What we’re doing is trying to segregate the funds like we’ve done for years and years and try and keep the transportation funds in a separate account, which is the fiscally responsible thing to do.”

Legislators are trying to balance an increase in gas and diesel taxes when the state is projected to have a $1 billion surplus in one-time funds next fiscal year and another nearly $1 billion of recurring extra money. Proponents of Gov. Bill Haslam’s amended plan say they need to continue letting fuel taxes fund transportation projects without borrowing money or using general fund revenue, which can be affected by economic downturns.

McCormick, a Chattanooga Republican, cut to the heart of the matter, saying the measure raises fuel taxes but incorporates greater tax decreases on the other side of the legislation.

“So it’s a net tax cut, and I think it’s important that that story get out there, rather than the other side, who’s against everything and is only good at losing elections. That’s the only thing they ever accomplish,” McCormick said.

Later, McCormick said he knew little about Harwell’s work with Hawk and other Republican leaders.

Rep. Barry Doss, who is carrying the measure through the House, told committee members a family of four would save $7.70 a month from a 1 percent tax cut shifting it to 4 percent from 5 percent, compared to a $5.40 monthly increase on a family of four with two vehicles.

Rep. Karen Camper raised questions about a $5 increase in the vehicle registration, which is part of the legislation, saying that should be considered in the impact on working-class Tennesseans. Even with that, though, McCormick said Tennesseans should receive an overall tax decrease.

Fuel-tax increases of 6 cents on gas and 10 cents on diesel phased in over three years, in addition to registration fee increases for all vehicles, including electric cars, would bring in $270 million for the state transportation fund, $35 million for cities and $70 million for counties, a total of $375 million, according to Doss.

The idea is to use that money to start chipping away at 962 projects included in the legislation costing some $10.5 billion, Doss explained. Local governments also would be given the ability to increase local taxes for mass transit projects through referendums.

Rep. Craig Fitzhugh pointed out the Legislature should call it a gas and diesel tax “increase.” Democrats believe a bigger cut should be made in the food tax.

Doss responded, “I prefer to call it a user fee because it’s paid by those who use the roads.”

The Lawrence County Republican contended the burden of fuel-tax increases would be softened by a food-tax reduction trimming $135 million from the general fund, a cut in the franchise and excise tax of $113 million and a $55 million reduction through the Hall tax, which the Legislature previously voted to phase out by 2021.

Hawk, a Greeneville Republican who previously tried to use a portion of the sales tax from the general fund to pay for transportation projects, pointed out by questioning Doss that the Legislature is using the general fund to soften the impact of fuel-tax increases.

“How does a reduction in the food tax help our infrastructure issues?” Hawk asked.

Doss explained the bill really deals with two separate issues: cutting general fund taxes such as the food tax and increasing fees on fuel purchases to pay for road and bridge projects.

If the Legislature were to isolate the matters, Doss predicted, neither the House nor the Senate would deal with a fuel-tax increase to raise money for transportation projects.

“I think it’s important we address the matter simultaneously,” Doss said, noting he and Hawk hold a “philosophical” difference on the matter.

Williams, who chairs the House Republican Caucus, offered his own plan but then withdrew it. He argued including the Hall tax reduction is like rewrapping “last year’s Christmas present” in order to sell the fuel-tax increase.

Sam Stockard is a Nashville-based reporter covering the Legislature for the Memphis Daily News. He can be reached at sstockard44@gmail.com.

RECORD TOTALS DAY WEEK YEAR
PROPERTY SALES 0 133 1,342
MORTGAGES 0 131 1,047
FORECLOSURE NOTICES 0 19 170
BUILDING PERMITS 28 305 3,056
BANKRUPTCIES 25 98 716
BUSINESS LICENSES 4 26 302
UTILITY CONNECTIONS 0 0 0
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