Gov. Bill Haslam announced Wednesday afternoon that he has signed Tennessee's gas tax plan into law.
The plan, formally known as the IMPROVE Act, calls for increasing the tax on regular gasoline in Tennessee by 6 cents and diesel fuel by 10 cents incrementally over the next three years.
The initiative differs slightly from the governor's original proposal, which would have raised taxes on regular gas by 7 cents per gallon and 12 cents on diesel.
To help balance out those tax hikes, sales taxes on groceries will decrease from 5 percent to 4 percent. That means for every $100 spent on groceries, shoppers will save $1 on taxes. The governor’s original proposal initially suggested a 4.5 percent tax on grocery sales.
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TDOT spokesperson Mark Nagi says the plan could help the department work through its $10 billion backlog of transportation projects about twice as quickly -- that's 962 projects in 95 counties.
"If the IMPROVE Act had not been passed, we could be talking 20, 30 years or even more before those projects would be done,” he told 10News. “With the passage of the IMPROVE Act, we're looking to have all of those projects either complete, under construction, or under contract within the next 13-14 years."
The plan also comes with tax cuts for businesses, including a gradual phase-out of the Hall Income Tax. The Hall Income Tax was already required by statute to be eliminated by 2022, but previously did not have a specific schedule, according to Haslam’s office.
The regular gas tax will rise over the next three years with an initial increase of 4 cents per gallon on July 1, and then one cent increases in 2018 and 2019.
Diesel fuel buyers will see an increase of 4 cents per gallon at the pump on July 1, and 3 cent increases in 2018 and 2019.
Neither Nagi or the governor's office was able to say when exactly TDOT would begin recieving the new funds.
Local government will receive a cut as well -- Knox County will bring in about $1.8 million annually after a three year scale-up. The city of Knoxville was not able to estimate their revenue.
Both governments plan to use the funds for maintenance and road re-surfacing, but not major building projects.