UT economics professor explains how gas tax bill affects drivers

KNOXVILLE (WATE) – The plan to clear a backlog of Tennessee road projects, paid for by a gas tax increase, is just a few steps away from becoming law. The Improve Act is a key portion of Governor Haslam’s agenda for the year. It calls for a six cents per gallon gas tax increase for most drivers. It hikes up the diesel gas tax 10 cents per gallon. The bill also lowers the grocery tax by one percent.

Some Tennessee drivers approve of the gas tax hike because that extra money will go toward repairing the state’s roads.

“I think Tennessee roads are in good shape, but it’s important to keep them that way,” said Tom Woodruff, a driver.

Matthew Murray, the director of the Howard H. Baker Center for Public Policy, said families will actually save a small amount of money with this bill. He said that is because of the reduced tax on groceries, which will primarily benefit low-income families.

Previous story: Tennessee House, Senate pass Gov. Haslam’s gas tax bill

“Low income households are probably spending a larger share of their income on food, at least food purchases from a grocery store, than would be the case for higher income households,” Murray said.

Murray also said trucking companies will probably support paying more for diesel because better roads means less wear and tear on trucks. However, some truck drivers who have to pay for their own gas said they are not too happy about the tax hike.

“I am going to pay it, and you all are going to pay it. It’s going to be passed on to the goods,” said Daryl Hobbs, an out-of-state truck driver.

Interstate truckers that pay for diesel pay the tax based on where they drive. They do not pay it based on where they buy the gas. Truckers do a reporting of the miles they drive in a state. This is how diesel taxes are allocated.

There was also concern over the lower grocery tax. Murray said that means there will be less state revenue to fund other programs like local education.

The bill still has to go back to the House for another vote before Governor Haslam could sign it. That’s to sort out House and Senate differences on the threshold amount for a property tax for veterans. It’s on the House calendar for Monday.

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