Which Tax Cuts Will Offset Proposed Gas Tax Hike?

Date: February 28, 2017


Discussions are underway about what taxes to cut to offset a proposed gas tax hike included in Gov. Haslam’s IMPROVE Act to fund a massive transportation package. Two of the main proposals generating debate: business tax cuts or sales tax cuts on groceries.

Arthur Laffer, an economist from the Reagan administration, spoke to a House committee last month and recommended bigger cuts to business taxes rather than any tax cuts on groceries because it would do more to help the state economy. Gov. Bill Haslam, whose tax cut proposals include the grocery sales tax, stocks and bonds income tax, and corporate taxes for manufacturers, acknowledged that a grocery tax will not bring more businesses to the Volunteer State, but that he thinks it would be a fair and equitable approach.

Meanwhile, two other bills have been filed that are alternatives to the IMPROVE Act. One would focus on eliminating taxes on a variety of items, including food, diapers, feminine products, and over-the-counter medications, as gas and diesel taxes increase. The other would take a quarter of a percent of the revenue generated by the general sales tax and allocate it to the transportation fund.

Regardless of the tax cuts that would offset the proposed gas tax hike, NFIB/TN members are split about the IMPROVE Act to begin with. Fifty-five percent oppose the tax hike, 40 percent support, and 5 percent are undecided. Other parts of the proposal received similarly mixed reviews, but most (75 percent) opposed the plan to index future gas tax hikes to inflation.


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