Working with the Tennessee General Assembly, we have signed into law the IMPROVE Act, a plan that includes the largest tax cut in Tennessee history, increases our competitiveness in recruiting manufacturing jobs, and provides for a safe, reliable and debt-free transportation network for Tennesseans.
The IMPROVE Act - Improving Manufacturing, Public Roads and Opportunities for a Vibrant Economy - puts money back in the pockets of all Tennesseans and helps us deliver 962 needed road and bridge projects across the state. I am grateful to the legislature, particularly to Senate Majority Leader Mark Norris (R-Collierville) and Reps. Barry Doss (R-Leoma) and Bill Dunn (R-Knoxville) for their hard work carrying the legislation.
The legislation is a net tax cut for Tennesseans, resulting in tax savings for an average Tennessee family, a fact confirmed by Americans for Tax Reform, an organization that opposes all tax increases as a matter of principle.
Overall, IMPROVE cuts nearly $300 million in taxes next year and more than $500 million annually in taxes at full implementation, including a scheduled full phase-out of the Hall income tax by 2022, as required by statute. Working with the General Assembly, the state will have cut more than $800 million in annual taxes since the start of this administration.
The legislation cuts the tax on groceries from 5 percent to 4 percent, which will mean a 1-and-a-half percentage cut in the grocery tax since 2012. This new cut will save Tennesseans $125 million annually on their grocery bills, for a total of more than $170 million since we came into office.
The IMPROVE Act also includes strategic tax cuts targeting manufacturing, making Tennessee more competitive to companies looking to relocate or expand in our state. We are focusing on manufacturing jobs because the average manufacturing job creates an additional three jobs out of the supplier ranks. I am confident this tax cut will mean more jobs for Tennesseans in the future.
Tennessee last addressed how to fund our roads in 1989, when it raised the tax on gasoline to 21 cents per gallon. Due to inflation and improved fuel mileage, the 21 cents has fallen to the equivalent of 11 cents per gallon. The IMPROVE Act will raise the gas tax 6 cents per gallon and the diesel tax 10 cents per gallon, each phased in over three years, and all new revenue goes only to address our transportation needs.
As a comprehensive and responsible road plan, IMPROVE includes projects in all 95 counties, urban and rural, and it will mean $70 million annually in increased revenue for counties and $35 million annually in increased revenue for cities. As part of this, electric vehicle owners and out-of-state drivers pay their fair share. It also allows local voters, through a referendum, in the state's largest counties and its four largest cities to impose a capped surcharge on taxes they already collect to be dedicated to transit projects.
The Tennessee we can be provides not only access to opportunity but the tools to be successful - good roads that take you to good jobs. As a conservative plan, the IMPROVE Act directly addresses how we fund our roads and bridges for the first time in 30 years as we build and sustain economic growth and opportunity for the next generation of Tennesseans.