TN Transportation Funding: Reasons for Reform

  • Tennessee’s economic success, both today and tomorrow, relies upon its ability to efficiently move goods and people within and through our state—especially for vital Tennessee business sectors like manufacturing, logistics and agriculture.
  • Tennessee must update its user-fee-based transportation funding system to meet 21st-century realities.  In order to continue benefiting from prudent fiscal policy and securing its recession-readiness, Tennessee must reform funding streams to allow its highway network to catch up with continuing growth in population, road use, fuel efficiency, inflation, and road-building costs.
  • Reforming Tennessee’s highway funding streams doesn’t require “re-inventing the wheel.”  Modest increases to the motor fuel taxes and registration fees that are the main sources of our state’s highway funding is a road-revenue-raising route that’s both fair and familiar to Tennessee taxpayers.  It stays true to the “user pays” principle, and uses existing collection and remission processes.
  • Combining enhanced transportation investments with cuts benefiting Tennessee taxpayers is a prudent state fiscal policy and pro-growth strategy. It supports continued state economic growth and appropriately shifts a greater share of our state’s funding burdens to non-Tennessee and higher-income taxpayers.
  • Tennessee cities and counties need freedom to fund transit solutions that promote efficient workforce commutes within, and visitor journeys through, their communities.  Local voters and elected leaders should be able to decide whether and how to fund transit solutions that don’t burden taxpayers in other Tennessee communities with the costs.


The Tennessee Business Roundtable is in favor of increased state transportation funding and toward that end, supports the following specific policy provisions:

1. Support continuation of the state’s “pay as you go” approach to funding roads.

  • Prudent state fiscal policy = avoids LT burdens of borrowing for infrastructure

2. Support reasonable increases in the state’s fixed-rate motor fuel taxes, which provide most current transportation funding and haven’t increased since 1989.

  • Keeps most of TN’s transportation revenue connected to a dedicated, non-general-fund revenue source = solid state fiscal policy
  • Shifts more of TN’s transportation funding burden to higher-income and non-TN taxpayers, especially in combination with tax cuts benefiting TN residents
  • Requires no new collection procedures 

3. Oppose proposals to divert or earmark portions of the state’s sales tax revenue to provide dedicated transportation funding, especially on a recurring basis.

  • Decreases TN’s “recession readiness” by adding burden on general fund revenue 

4. Support provisions to ‘tax all fuels equally’ by ensuring that electric and alterna­tive fuel vehicles bear an appropriate share of increased road funding costs. 

5. Support broadly-based “local option” provisions that allow TN’s county and city governments to raise revenues for local transit and transportation projects.

  • Local residents assume burden for local solutions, instead of all state taxpayers
  • Decentralizes decision-making; allows local residents to choose funding levels and mechanisms that match their area’s transportation needs

 6. Support, with appropriate limitations, “indexing” of future increases in state motor fuel taxes to counteract inflation and ever-increasing hwy. construction costs.

  • Limitations could include maximum caps, “safety valve” provisions

 7. Support cutting taxes on TN residents as part of transportation funding plans.

  • Tax cuts should be broad-based and alleviate impact of incremental fuel/registration burdens on Tennesseans, especially vulnerable populations

 8. Support allowing TN businesses to use Single Sales Factor (SSF) to apportion franchise & excise tax liability as part of tax cuts offsetting transp. fuel/fee increases.

  • Benefits TN-based businesses currently disadvantaged by apportionment rules
  • Could generate substantial positive economic impacts on employment, earnings