Tennessee’s IMPROVE Act Strikes Balance in Raising Critical Road Funds

When most states raise gas taxes, it typically unleashes a storm of protest and controversy, especially when the increase hits businesses and lower income people the hardest. But when Tennessee Gov. Bill Haslam signed the state’s first gas tax hike since 1989 into law on April 24, it was celebrated as the greatest tax overhaul in the state’s history.

The law does, in fact, raise taxes on gas by six cents and diesel by 10 cents over the next three years, an increase aimed at tackling a $10 billion backlog in infrastructure projects. However, the law simultaneously reduces taxes on groceries, businesses and investment earnings from stocks and bonds. In addition to much needed road improvements, the law, known as the IMPROVE Act literally offers something for everyone.

Much Needed Funds for Infrastructure Repair

The primary objective of the IMPROVE Act, which stands for “Improving Manufacturing, Public Roads and Opportunities for a Vibrant Economy,” is the backlog of 962 infrastructure projects in 95 counties, which, without the additional revenue would take 20 to 30 years to complete. The additional tax revenue is expected to accelerate project completions by 10 to 15 years.

Offsets for Grocery Shoppers…

While most Tennesseans welcome the initiative to improve roads and bridges, there were big concerns that the fuel tax increase would create a hardship on the state’s more vulnerable citizens. That’s why legislators sought to strike a balance with those tax hikes by cutting sales taxes on groceries from 5 percent to 4 percent. Whereas the gas tax increase is expected to cost the average family an additional $5 a month, the reduction in food taxes will save them $7 a month.

…and Low-Income and Veteran Homeowners

The legislature took it even further by including a property tax credit for qualifying low-income residents and veterans with disabilities. For the state’s veterans, the new law reinstates provisions in the program that exempted those with a “total and permanent” disability from paying property taxes on up to $175,000 on their home value. Due to the overwhelming number of applicants, the state instituted an income requirement, effective lowering the property tax exemption to $100,000. Veterans advocacy groups led the charge to have the income requirement eliminated and legislators took the opportunity with the IMPROVE Act to do just that.

A Smart Legislative Accomplishment

Not everyone is appeased by the give and take of the law. There are some groups insisting that it doesn’t go far enough to protect the state’s most vulnerable citizens. The Concerned Veterans for America accused lawmakers of using the property tax cuts for veterans as a cover for the devastation the law will have on people who count on affordable transportation. No law asking its citizens for more money is going to please everyone. However, most Tennesseans are anxious to see that state pull its infrastructure out of a spiral of disrepair due to lack of funds. The IMPROVE Act goes as far as any law can to take the sting out of a gas tax increase.