Governor Haslam proposes raising gas tax, lowering grocery tax

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NASHVILLE, Tenn. -- Republican Gov. Bill Haslam is proposing to raise Tennessee's tax on each gallon of gasoline by 7 cents while cutting the state's sales tax on groceries and income from earnings on stocks and bonds.

Haslam says average motorists would pay an extra $4 dollars more per month as part of his plan to generate $278 million annually in new money to pay for road projects around the state.

The governor says he would balance the gas tax increase with proposed cuts of $55 million in the sales tax on groceries, $113 million in corporate taxes for manufacturing companies and $102 million in the Hall tax on investment income.

Haslam also wants to tie the gas tax to inflation and let cities seek a sales tax surcharge to pay for transit projects.

The governor has acknowledged that any long-term road program to pay for the state's $6 billion transportation backlog will likely have to include the state's first gas tax increase since 1989.

Lawmakers aren't expecting him to propose a hike of more than 7 to 9 cents per gallon on top of the current 21.4 cent tax.

Other proposals could include designating a sizable chunk of the state's more than $1 billion surplus for road projects, and giving cities and counties the power to charge an additional local tax to pay for transit projects.