Democrats appear delighted about division within Republican ranks concerning Gov. Bill Haslam’s proposed fuel-tax increase, detecting a possible chink in the armor.
“How many times does the supermajority have to stab the governor in the back and undermine his core proposals before the people of the state of Tennessee wonder whether they need a different group up here?” asks Mike Stewart, House Minority Caucus chairman.
For the second time in consecutive sessions of the General Assembly, Republicans are fighting a major Haslam initiative.
Two years ago they defeated Insure Tennessee, a market-based plan to use Affordable Care Act dollars to help people caught in an insurance gap. As the 2017 session opens, they’re balking at Haslam’s combo of gas/diesel tax and motorist fee increases designed to raise about $400 million for transportation statewide coupled with business, Hall and grocery tax reductions to soften the blow.
Alluding to a proposal by Republican Rep. David Hawk to take a sliver of the sales tax to chip away at billions of dollars in backlogged road and bridge projects rather than the transportation fund, Stewart calls it part of the Republican “trend.”
He contends failure to adopt Insure Tennessee cost billions in dollars the feds would have sent back to the state. It “impoverished” the state, he says, and hurt Tennessee businesses.
“I think we’ve seen this over and over again as a focus on doing what’s politically expedient and not what’s good for the state,” Stewart says.
Nashville Sen. Jeff Yarbro echoes Stewart, saying on Groundhog Day, just four days into the session, it really felt like Groundhog Day with the supermajority sabotaging the governor’s main initiative and reviving what he terms a “dangerous voucher bill” while ensuring “Trumpism” is “alive and well” with a bill to stamp “alien” on the driver’s licenses of non-citizens.
“This week has demonstrated we’re not sure if the Republican supermajority is capable of actually governing the state,” Yarbro says.
The other side
The Republican Party is, no doubt, a victim of its own success at the polls.
With 74 House members and 28 of 33 senators, Republicans, especially those in the House, seem to live by rancor.
But the one thing they seem to agree on most is they abhor taxes, especially tax increases.
As a result, Hawk is proposing legislation to take a quarter of one cent from the sales tax increase passed in 2002 and designate it for transportation projects. His plan would raise $291 million in the first year, including $65 million for counties and $32.5 million for cities, to deal with road and bridge projects.
The Greeneville Republican, who received moral support from House Majority Leader Glen Casada during a press conference, says he is trying to get as close to the governor’s plan as possible without raising taxes.
It comes up about $74 million short of the governor’s plan but doesn’t include increases in motor vehicle registrations or fees on electric cars and other alternative fuels.
“My constituents have asked me to look within existing revenue to see if we can put the same investment in transportation funding that the governor’s plan does,” says Hawk, who is part of the House leadership team. “I believe we found a vehicle to do that, to live within existing revenues and to prioritize transportation funding at the same time.”
It must be noted that while Democrats such as Stewart say the rejection of Insure Tennessee has hurt the state’s business, Haslam’s $37 billion budget plan for fiscal 2017 contains $1.1 billion in one-time surplus and a projected $957 million in extra recurring money the governor wants to use for areas such as K-12, higher education, the rainy day fund, the retirement fund and TennCare.
He also plans to return $140 million taken from the transportation fund that was used to balance the budget about 10 years ago.
The morning after Hawk made his proposal public, the conservative group Americans for Prosperity, continuing its fight against Haslam’s gas tax plan, called for tapping the surplus and cutting franchise and excise taxes in addition to the Hall tax. The cuts would be similar to Haslam’s but wouldn’t include any grocery tax reduction, a key part of the governor’s equation.
AFP Executive Director Andrew Ogles contends franchise and excise tax cuts will do the most to stimulate and free up capital for business owners to invest in employees, manufacturing or capital expenses.
State Rep. Bryan Terry, a Murfreesboro Republican, points out the “working poor” would see a 6-to-1 ratio of tax increases.
Taking a portion of the sales tax for road work would “diversify” the state’s portfolio and keep it from depending too heavily on gas taxes for road construction, especially as vehicles become more fuel efficient, Terry contends.
Backing the AFP argument, state Sen. Mae Beavers recalls a half-cent sales tax increase approved when the income tax debate roiled the Legislature in the early 2000s.
“The next year after the half-cent sales tax was passed, which I didn’t think we needed, Gov. (Phil) Bredesen came into a billion and a half surplus the next year,” says Beavers, R-Mt. Juliet.
Beavers says she wants to send a message to Washington, D.C. that Tennessee needs to decide how it spends federal road money, instead of using it for walking trails and bicycle lanes.
“But the one thing that you’re not gonna bring home to people is that you need to increase their taxes when we have a huge surplus in Tennessee,” Beavers adds.
GOP split
Beavers may be going out on a limb in the Senate because new Lt. Gov. Randy McNally is siding with Haslam, and the Senate is likely to follow his lead.
“Tennessee is one of the most fiscally sound states in the nation. Our taxes are minimal, our debt per capita is low and we have a small and efficient government,’’ McNally says. “We accomplished this by being frugal, disciplined and smart. We have an outstanding pay-as-you-go road system that operates with little to no debt. We accomplished this with dedicated funding through our gasoline user fee.’’
“Put simply: Our formula for fiscal stability is proven, established and envied. Our system has earned as a Triple-A bond rating from all three ratings agencies. Any move away from the formula and the use of dedicated funding opens the door to debt and puts our fiscal stability at risk.”
Asked about Hawk’s proposal, Haslam says the fundamental part of his proposal would make everyone who drives in Tennessee, including out-of-state visitors and businesses, help pay for roads.
“Secondly, if you’re going to take money out of the general fund you’ve got to tell me what tax cut you’re not going to make or what expenses you’re going to cut because there’s not $270 million just waiting to be claimed,” Haslam explains.
He notes the state is usually cutting expenses instead of divvying up excess revenue.
The analysis
Even as the governor quibbled with reporters in a recent budget briefing over the definition of surplus money and extra money, concerned they aren’t helping sell the plan, the fact is the budget plan makes Tennessee the envy of the country. Oddly enough, Tennessee almost has too much money for Haslam’s plan to pass.
AFP prefers to call it $8.5 billion in government growth over the last six years, and some Republicans call it over-taxation or over-collection.
So how do you raise fuel taxes – 7 cents on gas and 12 cents on diesel in addition to a $5 increase in the vehicle registration fee – when you’ve got money in the bank?
Democrats say the late Gov. Ned Ray McWherter is likely rolling over in his grave at the thought of funding roads with sales tax money. But they don’t have an official plan, preferring instead, Stewart says, to negotiate the outcome with Haslam and seek a “progressive” solution, apparently, something that gives grocery buyers a bigger break.
Similar to Republicans, Democrats also say they aren’t hearing an overwhelming cry in favor of higher gas taxes while businesses and upper-crust Tennesseans get the majority of the breaks.
“Priorities are not in the right order,” Memphis Sen. Lee Harris says, calling the governor’s grocery tax cut “little bitty” in comparison.
But if Democrats want to win political points on this issue, they can’t get bogged down in policy. Voters understand “no new taxes” better than they can comprehend the revenue source for road construction.
In fact, some Tennesseans are saying a diesel tax increase would be passed down to consumers by trucking companies, so the fuel tax would be a double whammy at the pump and at the store.
Getting lost in all of this is the amount of traffic in Tennessee’s urban areas. But with AFP saying road projects won’t solve traffic congestion, Haslam has a tall order ahead. And so do Democrats if they hope to use the gas-tax debate to vault back toward a majority.
Sam Stockard can be reached at sstockard44@gmail.com.