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Gov. Bill Haslam’s Monthly Column

January 2017

This month we made a significant proposal to cut $270 million annually in taxes and keep our state’s transportation network debt-free for the next generation of Tennesseans. We call the plan the IMPROVE Act, “Improving Manufacturing, Public Roads and Opportunities for a Vibrant Economy.”

This legislation would not only cut $270 million in taxes but bring the total number of cuts our administration has made and proposed since 2011 to $539 million. That’s roughly nine times more than any other administration. Tennessee’s taxes are the lowest in the nation as a percent of personal income, and we also have the lowest debt per capita. Yet we have invested – and will continue to invest – in K-12 and higher education.

But while we are a low-tax state per person, that’s not true for businesses. On the taxes on the value of a business, franchise taxes, we’re among the highest. So part of the IMPROVE Act is a change in the way we tax manufacturers. For businesses that make big investments and have a lot of employees, we currently tax them heavier than almost any other state.  Our proposal is to create $113 million in tax cuts in the ongoing budget to address that.

Manufacturing is important to our state, and it has a multiplier effect. For example, we have three major auto manufacturers in Tennessee – Nissan, Volkswagen and GM.  We have 914 auto suppliers. We want to encourage manufacturing because of all the jobs that follow it.

We also propose to cut the grocery tax from 5 percent to 4.5 percent. That will be a $55 million cut.  We have already cut the grocery tax from 5.5 percent to 5 percent, so that would be a total of over $100 million in cuts to the grocery tax we will have made.

Finally, we propose cutting the Hall tax 1.5 percent this year and another 1.5 percent next year, totaling $102 million over the next two years.

The second part of the IMPROVE Act addresses transportation infrastructure. Tennessee last addressed how we fund our roads and bridges in 1989 when the state raised the fixed tax rate to 21.4 cents per gallon of gasoline. Due to inflation, increases in construction costs and the cost of land and better gas mileage, the state comptroller estimates that 21.4 cents in 1989 is now worth approximately 11 cents a gallon. The money goes half as far as it once did.

We are proposing an increase of 7 cents per gallon in the road user fee for gasoline and 12 cents for diesel. Under our plan, the average Tennessee road user would pay an additional 4 dollars a month. We also propose increasing registration fees 5 dollars per car for the average passenger vehicle and a graduated amount for other vehicles, an annual $100 fee for electric cars, and a 3 percent additional charge for rental cars.  We propose that fuel taxes be indexed every two years to the Consumer Price Index, with caps so the tax rate can keep pace with the cost of construction and maintenance on roads.  We will also pay $135 million from the transportation fund to the general fund.

Our comprehensive plan will mean $278 million in new revenue to fund 962 projects in all 95 counties. The plan is balanced, with 52 percent of the projects in urban areas and 48 percent in rural areas and also provides an additional $78 million for counties and $39 million for cities for local transportation projects.

The IMPROVE Act is aimed at building and sustaining economic growth in our state’s competitiveness for the next generation. We have worked hard to reduce the cost of government, cutting taxes and recruiting jobs. This keeps us on that same path.