I love it when my natural inclination to be pessimistic turns out to be wrong.
In February, I posited the notion that the Tennessee General Assembly might not pass the IMPROVE Act (the acronym is for Improving Manufacturing, Public Roads and Opportunities for a Vibrant Economy) because, I said, the legislative body, “is full of individuals who make decisions by wetting their fingers and testing the wind.”
Well, either I underestimated some of those distinguished ladies and gentlemen’s integrity or I discounted the possibility of the wind changing direction. The State House of Representatives passed the bill by a 60-37 margin, with the Senate bill voting in favor 25-6.
On April 26, Governor Bill Haslam signed the IMPROVE Act. It was a political triumph for Haslam, to be sure. He can claim to be the governor who proposed the largest tax cut in Tennessee history (including a 20 percent cut on food). He can point to his responsiveness to business and economic development interests who had asked Tennessee to rededicate itself to providing safe, easily accessed, well-maintained transportation infrastructure. Perhaps most importantly, he can tell companies considering relocation that Tennessee remains a business-friendly state.
The legislation cuts nearly $300 million in taxes next year and more than $500 million in taxes annually at its full implementation. The tax cuts include a 20 percent decrease in the sales tax on groceries that equals $125 million and a $113 million reduction in business taxes on manufacturers. The legislation also begins an annual cut in the Hall income tax – a tax that is statutorily required to be eliminated by 2022 but previously without a specific schedule to do so.
While those who oppose every tax increase were unhappy to see the cuts partially mitigated by an increase in the state gas tax, the net effect of increasing that tax will be to fund nearly 1,000 road and bridge projects across all 95 Tennessee counties. The gas tax increase will be put in place through what the governor’s office refers to as, “a conservative, responsible and user-based approach of raising the gas tax by six cents and diesel tax by 10 cents, each over the next three years.” The IMPROVE Act also increases the user fee for electric vehicle owners.
For those who say the economy will be harmed by three straight years of two cent per gallon gas tax hikes, I would suggest referring to what the Tennessee average price per gallon was exactly three years to the day before the act was signed: $3.52. I think the odds are good we can absorb the six cents over the next three years.
The act prioritizes 962 projects across the state. See the table on this page for the number of projects and projected cost to completion for projects the IMPROVE Act will fund in Northeast Tennessee counties.
For my money, the best part of the IMPROVE Act is that it won’t force Tennessee taxpayers to shoulder the entire burden of upkeep for our roads and bridges alone, as revenue will be captured from both visiting tourists and trucks moving goods through the state.
Finally, the IMPROVE Act continues Tennessee’s history as a pay-as-you-go state, meaning the people who use the roads pay for their upkeep. No new debt will be incurred in the fulfillment of the IMPROVE Act’s promise.
Congratulations to the governor and his staff for coming up with a plan that cuts taxes and provides an equitable solution to the growing infrastructure problem. And apologies to the legislators who saw the sense in it. More than scoring a political triumph, they have shown that government can cut taxes and improve the quality of state services at the same time.