The General Assembly’s recent passage of Haslam’s IMPROVE Act had a number of moving parts: A $125 million reduction in sales tax on groceries by reducing the tax rate from 5 to 4 percent; a cut in business taxes for manufacturers by $113 million; and an increase in the gas tax by six cents and diesel tax by 10 cents over the next three years, plus an increase in the user fee for electric vehicle owners.
The IMPROVE Act result, Haslam insisted during a recent stop in Carter County, is 962 road and bridge projects across all 95 counties will move forward, and will mean an additional $70 million annually for counties and $35 million for cities.
“If you talk about the number of projects it will be just that, there will be a huge economic impact,” Haslam told reporters. “We’re also putting money back in citizens’ hands. They will have more money to grocery shop … the other thing is the cut on manufacturers. Somebody like Eastman obviously produces a lot of jobs. Eastman will now have more incentive to keep those jobs in Tennessee because the tax they pay as a manufacturer will be more in line with our neighboring states.”
Haslam said one business, Finland-based tire maker Nokian Tyres, cited the IMPROVE Act as a major factor in its decision to invest $360 million in a new tire manufacturing facility in Dayton that is expected to create 400 new jobs.
“We’re in the middle of several conversations right now that I think having that tax cut for manufacturers has given us a leg up,” Haslam said. “We’ve never had that many prospective jobs in the pipeline. It’s a little like having a fish on the line, but it isn’t the same as getting it to the bank. I can assure you we got a lot of people’s attention when we cut that tax for manufacturers.”
When fully executed, the Haslam administration says the IMPROVE Act will cut more than $500 million in taxes annually, bringing the total amount of tax cuts by the administration to more than $800 million. Since 2011, the governor has worked with the General Assembly to cut more than $500 million in on-going expenses out of the state budget, and Tennessee continues to have the lowest taxes in the nation as a percentage of personal income, according to a state release.
Motorists may not have felt the fuel tax increase that took effect on July 1. AAA reported that on July 4, gas prices averaged $1.99 in Tennessee - seven cents less than a year ago, and the lowest price for the holiday since 2004.
But while groups like the Tennessee Infrastructure Alliance hailed the IMPROVE Act, it was opposed by the advocacy group known as Americans for Prosperity – Tennessee (AFP-TN).
AFP-TN said it will hold a statewide tour to thank legislators who voted against raising the gas tax.
“As documented by a recent ALEC (American Legislative Exchange Council) report, Tennessee taxpayers can expect to pay an additional two-billion-dollars over the next 10 years,” AFP-TN said in a release.
“We knew the Improve Act was a tax increase for most Tennesseans,” AFP-TN State Director Andy Ogles said. “ … It is a shame only 43 lawmakers opposed this massive two-billion-dollar tax hike even as Tennessee had over a billion-dollar surplus, but those that did stand up for taxpayers deserve our thanks.”
Two Northeast Tennessee Republican state House members, Gary Hicks and John Holdsclaw, defended why they voted for the IMPROVE Act.
“One of the first things I did when I began to look at the IMPROVE Act was to see how it was going to affect the rural communities … when I saw the money that was coming back into Hawkins County and Hancock County, it was a no-brainer. You can’t make up that kind of revenue for the area I represent,” said Hicks, R-Rogersville.
Holdsclaw, R-Elizabethon, noted he initially was undecided about the bill.
“The biggest factor that swayed me … when you look at the trucking industry, 40 percent is from out of state. So that diesel fuel tax is going to be paid by other people … and about 30 percent of cars are from out of state,” he pointed out. “I would rather let them pay that instead of generating revenue from our citizens. That was a key factor in deciding it was the right thing to do.”
Haslam declared one of the state’s most basic services is providing roads.
“We have a $10 billion backlog (in road projects),” Haslam said. “Your summer barbecue just got a little bit cheaper … you pay less in taxes per person than any other state in the country … your percentage of state debt is the lowest in the country.”