Tennessee Lawmakers to Mull Tax Cuts, More Transportation Funding

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BRADENTON, Fla. - Tennessee Gov. Bill Haslam rolled out legislation Wednesday that would cut taxes and increase transportation funding for the first time in 28 years.

Haslam said it is the first piece of legislation under his NextTennessee plan consisting of policy proposals aimed at building and sustaining economic growth in the state.

Calling it the IMPROVE Act - Improving Manufacturing, Public Roads and Opportunities for a Vibrant Economy - Haslam said the legislation contains a series of actions for lawmakers to consider in the current session, which runs through mid-April.

"This proposal is the next step in the conversation about how we're going to position the state to address expected growth, maintain Tennessee's economic momentum and remain competitive as we continue recruiting high quality jobs," Haslam said.

Under the act, he's proposing to cut the state sales tax on groceries by one-half percent to 4.5%, make changes in the franchise and excise tax on manufacturing businesses, and cut the state's income tax rate by 1.5% on interest from bonds, notes and stock dividends – measures he said would cut taxes by about $270 million a year.

The IMPROVE Act also includes a transportation component to maintain the state's policy of funding projects on a pay-as-you-go basis to keep roads debt free, according to Haslam.

The plan would increase taxes by seven cents per gallon of gas and 12 cents per gallon of diesel fuel, as well as increase car registration fees by $5 for the average passenger vehicle.

Fuel taxes would be indexed to the Consumer Price Index to keep up with the rate of inflation, but an upper-end cap would apply.

The act would place an annual fee on electric vehicles, increase the charges on vehicles using alternative fuels, implements a 3% charge on rental cars, and make changes that give the Tennessee Department of Transportation more flexibility to use $18 million in existing federal dollars.

"The IMPROVE Act would bring in $278 million in new dollars to the state for projects while limiting the impact on the average Tennessee motorist to approximately $4 a month," Haslam said.

The new transportation measures would provide funding for 962 projects in all 95 counties, and provide an additional $39 million to cities and $78 million to counties, he said.

The legislation would also allow municipalities, if approved by their voters, to impose a surcharge on their sales tax rate that would be solely dedicated to public transit projects.

Tennessee last made changes to road and bridge funding in 1989 when it raised its fixed tax rate to 21.4 cents per gallon, state officials said.

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