Status Update:
The General Assembly as a whole was unwilling to increase taxes in an election year and a climate of unprecedented fuel price increases resulted in no action.
Background
In 1923, the General Assembly created a gasoline tax and followed in 1941 with the creation of a diesel tax. These taxes were established as user fees and the revenues were applied toward funding the cost of new construction and the maintenance of Tennessee’s infrastructure.
These taxes have been increased a number of times since their inception. The last increase in the gasoline tax occurred in 1989 and the diesel tax was last increased in 1990. The current gasoline tax is 20¢ per gallon with the diesel taxed at 17¢ per gallon.
Municipalities receive 12.73¢ per dollar generated from the gasoline tax and 8.70¢ per dollar generated from the diesel tax. Gas and diesel tax revenues are earmarked for municipal infrastructure and transportation needs.
Problem
In the last decade, the price of concrete has increased over 70% with the cost of asphalt surface mix increasing 120% in Tennessee. Other materials used in construction and maintenance of our roads have seen similar increases.
During this same time period, revenues from the gasoline and diesel taxes have failed to keep pace with the significant increase in the cost of materials; averaging a combined annual growth rate of just 1.9%.
In addition, Tennessee recently lost $170 million in federal infrastructure and transportation funds and anticipates losing another $64 million this year; requiring local governments to divert funds from other local programs to address immediate transportation needs.
The increased cost of road constructions materials, anemic growth in revenues, and the loss of federal funds has placed many road projects and the routine maintenance of existing infrastructure at risk. Under such constraints, Tennessee’s communities will struggle to adequately support the expansion and growth that fuels the state’s economy, keep pace with traffic congestion, and provide for the efficient, safe, and sustainable movement of goods and people throughout our state.
Proposed Remedy
SB 129 (Cooper)/HB 736 (Curtiss) increases the gasoline and diesel taxes by 2¢ per gallon respectively. The additional revenues generated by this increase would be distributed to local governments with 66 2/3% allocated to the various counties of the state and 33 1/3% allocated to the various municipalities of the state.
If enacted, Tennessee’s gasoline and diesel tax rates would remain below the national averages leaving 28 states with higher gasoline taxes and 38 states with higher diesel taxes than Tennessee.
Anticipated Benefits to Municipalities If enacted, the increase in the gasoline and diesel taxes will produce approximately $26.75 million annually to be distributed to municipalities based on population. This additional revenue would (1) assist municipalities in addressing continuously growing infrastructure needs, (2) keep pace with increases in the cost of materials, (3) adequately support economic expansion, (4) mitigate traffic congestion and (5) provide for the safe transport of people and goods across the state.
