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House, Senate approve Haslam's gas tax proposal

The legislation, known as the IMPROVE Act, seeks to help address the state's estimated $10 billion backlog in road projects.

The Tennessee General Assembly handed Gov. Bill Haslam a major victory Wednesday, approving his plan to raise the tax on gas and diesel to help fund a $10 billion backlog in needed transportation projects.

The House and Senate approval of his signature piece of legislation for the year moves the state one step closer to increasing the tax on gasoline for the first time in nearly 30 years.

After more than four and a half hours of discussion and debate, the House approved the measure with a 60-37 vote, thanks to support from a bipartisan coalition of lawmakers.

Less than 30 minutes after the House's action, the Senate began taking up the measure, passing it after an hour of discussion with a 25-6 vote.

Haslam's proposal, known as the IMPROVE Act, seeks to raise the tax on gasoline and diesel fuel by 6 cents and 10 cents, respectively, over a three-year period while also featuring myriad tax cuts.

The governor has stressed the need for the legislation, which includes 962 projects in all 95 counties in the state, in part to help fix the state's crumbling roads and bridges, while also bolstering the revenue stream that he says is outdated.

To make the proposal more palatable to lawmakers, Haslam's plan includes slashes to the state's tax on groceries, reductions to the franchise and excise tax, starting the phase-out of the Hall Income Tax on certain investments, and property tax relief for eligible disabled veterans and the elderly.

Under the plan, "The average family of four will save about $2.18 per month," said Rep. Barry Doss, R-Leoma, one of the sponsors of the legislation.

But opponents argued the state should use its budget surplus instead of raising the gas tax to pay for infrastructure improvements.

During the House floor debate, Rep. Jerry Sexton, R-Bean Station, who had been critical of the governor's plan, in addition to others, said the measure was contrived and supported by special interest groups.

“I don’t hear any lobby speaking for the average taxpayer in Tennessee," said Sexton, who was one of the nearly 40 lawmakers to speak during the floor debate.

Rep. Gerald McCormick, R-Chattanooga, said in the near future Tennesseans are going to see that they will experience a net tax decrease under the legislation. "The decrease is the biggest tax decrease in the history of our state," he said. "It just is. You can have your own opinion, but you can't have your own facts on this thing."

An alternative proposal, which would have used a portion of taxes collected from the sale of new and used vehicles instead of a gas tax increase, failed to garner enough support on the floor. House leadership, including House Speaker Beth Harwell, R-Nashville, had advanced that alternative proposal.

Immediately after the House adjourned, Harwell defended her vote for the IMPROVE Act despite preferring the other plan.

"At the end of the day, infrastructure is a limited role of government and we need to perform it well," she said.

House Minority Leader Craig Fitzhugh, D-Ripley, said he was proud his caucus members supported the governor's plan.

“It’s not perfect and there are certainly things we don’t like in it, but in the scheme of things, you can’t get everything you want," he said. "But this is what Tennessee needs."

House Democratic Caucus Chairman Mike Stewart, D-Nashville, said his members were pleased to halt the alternative plan, which he said would "gut our entire budget and destroy health care and education funding."

Two Democrats — Reps. G.A. Hardaway of Memphis and John Mark Windle of Livingston — were the only members of the minority party to vote against the governor's proposal.

House Majority Leader Glen Casada, R-Franklin, was absent for the vote. A House Republican spokesman said Casada was tending to prior business obligations.

Although there was significantly less discussion and the debate was nowhere near as heated as that of their counterparts in the House, the Senate did see some opposition to Haslam's plan.

"I'm a conservative Republican, I'm not going to tax the people, it's just simply not in my DNA," said Sen. Dolores Gresham, R-Somerville, who was among the six Republicans to vote against the measure in the upper chamber.

Immediately after the Senate's passage of the governor's bill, Lt. Gov. Randy McNally, R-Oak Ridge, praised the work of both legislative bodies.

"The plans passed by the House and Senate today represent a clear and undisputed tax cut for the people of Tennessee — the largest such tax cut in Tennessee history. It is a remarkable achievement," McNally said in a statement.

Despite approval of the IMPROVE Act by the House and Senate, differences between the upper and lower chambers remain. The Senate's version of the legislation contains a provision that provides tax relief for eligible veterans and elderly Tennesseans. The upper chamber further amended the legislation to include even more tax relief for veterans than initially expected.

The House's version contains no such provision, with the chamber's lawmakers instead favoring separate legislation to address the issue.

"I am hopeful that the House can add property tax relief for veterans and the elderly to the bill so the General Assembly can officially send the governor the largest tax cut in Tennessee history for his signature," McNally said.

Although the differences could send the House and Senate into a conference committee to work out the differences, such action appears unlikely.

“We are going to move to substitute and conform, all (House) members want the veteran and elderly tax relief," said Doss, one of the sponsors of the bill. "It’s just a matter of who gets the credit for it, and we don’t care who gets credit as long as it gets done.”

In a statement, Haslam praised Doss, Rep. Bill Dunn, R-Knoxville, and Senate Majority Leader Mark Norris, R-Collierville, for their work on the legislation, which he also said provided the "largest tax cut in Tennessee history."

The legislature's action on Wednesday was met with praise by many, including Nashville Mayor Megan Barry and the Tennessee Transit Coalition.

Tennessee's gas tax, which is currently 21.4 cents per gallon, was last raised in 1989.

Previous story

As expected, Gov. Bill Haslam’s gas tax proposal has been the most dominant issue of this year’s legislative session.

On Wednesday, lawmakers will finally have a chance to formally adopt or reject the plan, which seeks to raise the tax on gasoline and diesel fuel by 6 and 10 cents, respectively, while also calling for a variety of tax cuts.

All eyes will be on the House at 9 a.m. local time when the chamber is set to take up the controversial plan, designed to help fund a $10 billion backlog in transportation projects across Tennessee. If the chamber approves Haslam’s proposal, the Senate could take up the measure as early as Wednesday afternoon or Thursday morning.

Here’s what you should know going into Wednesday’s action:

House and Senate differences

The House and Senate have taken significantly different approaches to the governor’s proposal. After initially waiting for the House take up the measure in committee, Senate leadership, led by Majority Leader Mark Norris, R-Collierville, worked with the governor’s office to make changes to the proposal.

Haslam’s original plan sought to raise the gas and diesel tax by 7 and 12 cents per gallon, respectively, increase vehicle registration fees, reduce the state's sales tax on groceries by a half-percentage point, follow through on plans to eliminate the Hall income tax, cut the state's franchise and excise tax and allow local governments to hold referendums to raise additional revenue for transportation funding.

After discussions with Haslam around the time of former Sen. Douglas Henry's funeral in March, Norris introduced an altered version that, among other things, provides property tax relief to eligible veterans and elderly, reduces the sales tax on groceries to 4 percent and would increase the tax on gas and diesel by 6 and 10 cents per gallon, respectively, over a three-year period.

The changes came after lawmakers already scuttled a portion of the bill that called for tying the gas tax to the Consumer Price Index and a plan to implement fees on rental cars. Another provision of Haslam's plan that tried to end a state law that allows open containers of alcohol in vehicles failed to gain traction.

After Norris’ changes, some House members slammed the Senate, saying the inclusion of the property tax relief for veterans was a political ploy to gain votes. Senate leaders have said they added the property tax aspect, which Haslam’s office has expressed concern over in the past, to the IMPROVE Act in order to ensure it is included in the budget.

The House has since removed the property tax elements in favor of individual bills that specifically address the issue. Complicating matters more, the Senate versions of the individual property tax relief bills have been halted for the year. 

Beyond the main differences, House leaders have also frequently worked to significantly gut the legislation in favor of alternate proposals that would not rely on a gas tax increase. The Senate has said such House plans, which have failed to generate enough support heading into the floor vote, are non-starters.

If the House and Senate approve different versions, the legislation would head to a conference committee where lawmakers from both chambers would try and work out their differences.


Haslam confident in proposal

On Tuesday, Haslam said he was "optimistic" that lawmakers will approve his proposal.

"Obviously what we're hoping for is that we come out of this with a road plan that helps address the needs that we have in Tennessee," Haslam told reporters after an event at the Nashville Public Library.

The governor declined how many votes he thinks he has for the plan heading into Wednesday's action.

"I've learned enough in this, you never know how many votes you have until it goes up there on the board," Haslam said.

Lengthy debate

In 2015, when the House took up a measure to name the Holy Bible the official state book, the chamber debated the idea for more than an hour. Last year, after Haslam vetoed the legislation, the chamber discussed overriding the governor’s action for nearly two hours.

As Haslam's gas tax plan has made its way through the committee process, it has been subjected to lengthy debate and procedural maneuvers. As a result, it would be hardly surprising to see either occur on Wednesday.

The chamber has nine items on its agenda for the day, with the gas tax proposal falling right in the middle. A House committee is scheduled to meet at noon so the debate could be limited to a maximum of two or three hours.

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