Tennessee Obligated To Hike Taxes On Gas To Offset Any Cuts Federals Make

By Kleinheider Posted on April 21, 2008 at 11:32 am

Ben Cunningham has made an important discovery. Even if John McCain’s idea for a reduction in the gas tax becomes a reality, Tennesseans won’t see any relief at the pump. Tennessee Code Annotated stipulates that if the federal taxes are ever decreased on gasoline that Tennessee will keep the tax rate status quo and pick up the collection duty:

[I]f the federal government reduces or eliminates any or all taxes imposed by title 26 of the United States Code and allocated by chapter 98 of that title of the federal highway trust fund, the existing state tax imposed on the sale and/or use of such products shall be adjusted so as to maintain the amount of funding for the Tennessee department of transportation generated by the federal tax. The adjustment in the state tax shall become effective simultaneously with the reduction in the federal tax. The department of revenue is directed to collect such taxes and allocate such taxes in their entirety, less the appropriate cost of administration, to the state highway trust fund for use by the department of transportation. If the federal goverment elects to increase any or all taxes imposed by title 26 of the United States Code and allocated by chapter 98 of that title to the federal highway trust fund after it has reduced or eliminated such taxes, the state tax on the sale and/or use of such products is reduced equal to the amount of the increase by the federal government. No amounts of revenue received pursuant to the provisions of this section shall be pledged specifically to the payment of debt service on any state bond or note.

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Tags: annotated code, fedgov, gas tax, highway funds, State of Tennessee