By Scott Robertson
Last year, Tennessee Governor Bill Haslam dipped a toe in the water to see whether he could gain any traction on the idea of a gas tax hike to pay for highway fund increases. Tennessee’s highways have for the last couple of decades been among America’s best, and they are built and maintained on a pay-as-you-go basis, rather than through issuance of debt. But prices of labor and materials used in the construction and maintenance of roads and bridges have risen in that time, while funding to cover those costs has not.
Tennessee last addressed how it funds its roads and bridges in 1989. At that time, it raised the fixed tax rate to 21.4 cents per gallon. The funds raised then helped build a transportation network that has driven economic growth ever since. However, not only has inflation raised the prices of labor and materials, the cost of land has risen as well. And because cars now get better gas mileage, the state comptroller says those 21.4 cents from 1989 are worth around 11 cents per gallon.
With businesses and economic developers asking the state to make sure Tennessee’s infrastructure wouldn’t decline, Haslam went to bat for them. Haslam is, if nothing else, an economy-minded individual.
But state lawmakers in 2016 were not just cool to Haslam’s ideas. They were downright frosty. They let the governor know there would be no funding increases for highway spending until his administration had made a good faith effort to pay back into the highway fund moneys that had been transferred into the general fund years ago. So Haslam wrote a budget that put $130 million back into the general fund. Ask and ye shall receive.
This year, Haslam issued a statement before the legislative session began announcing he would be increasing the road user fee by 7 cents for a gallon of gas and 12 cents for a gallon of diesel, while increasing automobile registration fees by $5 for the average passenger vehicle.
Haslam’s IMPROVE Act, “Improving Manufacturing, Public Roads and Opportunities for a Vibrant Economy,” also places an annual road user fee on electric vehicles and increases charges on vehicles using alternative fuels.
In addition, the proposal includes a 3 percent charge on rental cars and changes the state’s open container law to allow the Tennessee Department of Transportation the flexibility to use $18 million in existing federal dollars on roads. Under the auspices of the IMPROVE Act, fuel taxes would be indexed to the consumer price index in order to keep up with the rate of inflation so this situation doesn’t repeat itself a few years down the road. Importantly, Haslam noted, fuel taxes would also be capped, so that if the CPI rose too sharply, the price of gas would not follow a similar upward trajectory.
Finally, Haslam said, he would do what any fiscally responsible Republican would do. He would cut other taxes to zero out the cost of this increase. So the governor who is quick to remind us that he has already presided over $270 million in tax cuts and more than $500 million in recurring cost cuts set to it again.
According to a statement issued by Haslam’s office Jan. 18, “The IMPROVE Act cuts the sales tax on groceries another .50 percent ($55 million) to 4.5 percent, making a total cut to the sales tax on food of 1 percent, or $101 million, during Haslam’s administration; makes Tennessee’s franchise and excise tax on manufacturing businesses more competitive by allowing companies to go to a “single weighted sales factor” ($113 million); and cuts the Hall income tax 1.5 percent this year with a commitment to cut it another 1.5 percent next year (3 percent, $102 million) – a tax that is statutorily required to be eliminated by 2022 but without a specific schedule to do so. IMPROVE cuts taxes by an estimated $270 million annually, bringing the total number of cuts made and proposed since 2011 to $540 million annually, roughly nine times more than any other administration.”
So Haslam has done all he has been asked to do. He has paid back the general fund the moneys that other governors had borrowed. He has cut taxes elsewhere to make sure Tennessee taxpayers’ net a 0 percent increase. And he has done so with a record of keeping his pledges to cut spending overall.
So why should he be nervous? Because he is dealing with a legislature full of individuals who make decisions by wetting their fingers and testing the wind. Because he is already hearing his good faith efforts to pay for the increase described as, “having too many moving parts,” whatever that’s code for. And because no increase tied to inflation is likely to make it through the State House. Sure it would pave the roads, but it might also pave the way for some legislators to be primaried out by challengers who believe Norquistian absolutes are more important than safety and jobs.
So ask, governor, but ye may not receive a thing.