There’s no denying that Tennessee’s infrastructure is in need of repair. But Gov. Bill Haslam’s proposed gas tax increases to fund the projects—which the state House of Representatives will vote on this Wednesday – isn’t the right solution. Instead, lawmakers should use money already in the state budget, which is more than enough to meet our transportation needs.
The key component of Gov. Haslam’s plan is to increase the state’s tax by 7 cents a gallon on gasoline and 12 cents a gallon on diesel – respective increases of 33 percent and 65 percent over what we currently pay today. Not only that, but it will also be indexed to inflation every other year. That means each time you go to the pump, you’ll pay more to the state and have less money to spend on your personal needs—and it will get worse every two years.
On top of the gas tax increase, Gov. Haslam wants to nickel-and-dime us with an increase in vehicle registration fees, too. All combined, the governor’s proposal includes nearly $300 million in higher taxes every year.
And that’s not all. The proposal would also give municipalities a bite at the tax apple, allowing them to hold referendums on raising local sales taxes to fund public transportation projects. This opens the door to even higher taxes down the road.
Having every family in the state pay higher taxes is the last thing we need. A 2015 study by federal economists found that Tennessee already has one of the most regressive tax systems in the country, meaning that people who can least afford it pay more taxes relative to their incomes than higher earners do. Raising the gas tax would only make that disparity worse.
Gov. Haslam has tried to gin up more support for his tax increases by offering tax reductions elsewhere. But of the $270 million in tax cuts being offered, only about 20 percent would be new changes that go straight to consumers. The other 76 percent is a combination of business tax cuts and an acceleration of tax cuts that were already passed last year. That’s not a tradeoff Tennessee families should be forced to take.
So, who actually does support all of these tax increases? You guessed it—the special interests who stand to benefit from more government spending. A bevy of groups—led by the construction industry—is chomping at the bit for more tax dollars.
A better solution to our transportation woes is currently being offered by state Rep. David Hawk. Rather than raise new taxes on Tennessee families, it uses revenue the state already collects, shifting one-quarter of 1 percent of the current state sales tax to the transportation budget. Currently, the sales tax revenue just goes into the state’s general fund.
This commonsense proposal would easily meet the state’s transportation needs. Rep. Hawk’s plan would generate nearly $300 million annually in state and local transportation projects, which is more than what Gov. Haslam’s gas tax hikes would do.
Some argue this is a bad idea because it will divert funding from other important projects. Not true. Tennessee currently has a $2 billion budget surplus, which is more than enough to cover remaining state needs. This is the whole reason we build a surplus in the first place—to spend it when we need it, rather than raising taxes across the state.
The bottom line is that Tennessee doesn’t need higher taxes—we need to be smarter with how we spend the money we already have. State legislators should oppose Gov. Haslam’s gas tax hike on Wednesday, and go for Rep. Hawk’s commonsense solution instead.
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Andrew Ogles is the Tennessee state director of Americans for Prosperity.
