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Haslam proposes first Tennessee gas tax hike since 1989

State of Tennessee

NASHVILLE, Tenn. (AP) — Republican Gov. Bill Haslam on Wednesday proposed Tennessee's first gas tax hike in 27 years to fund an ambitious roadbuilding program that would carry through well after he leaves office in two years.

Haslam's plan would generate about $278 million per year in new transportation funding, while at the same time cutting about $270 million in taxes for shoppers buying groceries, manufacturing companies investing in the state and people earning income from stocks and bonds.

The governor also wants to index further gas tax increases to inflation, though he acknowledged that might be the most challenging aspect of his plan for lawmakers to accept. But Haslam argued that the state's $6 billion backlog in transportation projects should spur legislators into action.

"Hard stuff is hard to do," the governor said. "I recognize that this is not an easy thing to do. But I think people understand that we have to do something.

Haslam cautioned that if lawmakers tweak the plan to include a lower tax rate or to remove the indexing element, it will just take longer to get road projects underway.

"There's no pixie dust here: It's all dollars in, dollars out," Haslam said. "And that's the conversation we want to have."

Other elements of Haslam's plan include:

— Raising the tax on diesel by 12 cents to bring it into line with the gas tax.
— Adding a 3 percent charge on cars rented in Tennessee.
— Collecting $18 million for road projects by bringing the state's open alcohol container law into federal compliance.
— Increasing car registration fees by $5 for the average passenger vehicle.
— Giving cities the authority to hold referendums on whether to increase local sales tax rates to pay for mass transit projects.  This local option is likely geared toward getting urban Democrats on board with the plan, which could be crucial to the measure passing in both chambers. Republicans, who hold a wide majority, are skittish about voting for any tax increase, even if it is balanced with cuts to taxes in other areas.
A recent study by state Comptroller Justin Wilson found that Tennessee's fuel tax collections have remained essentially flat since 2000 amid improving fuel efficiency, decreasing miles driven and mounting road building costs. The purchasing power of the state's gas tax collections has fallen by about half since the last time the tax was increased in 1989, according to the report.