Gas Tax Could Rise in New Jersey for First Time Since 1988

by | October 3, 2016

By Maddie Hanna

In a surprise announcement Friday afternoon, Gov. Christie and legislative leaders said they had reached a deal to raise New Jersey's gasoline tax by 23 cents a gallon -- an apparent end to a political impasse over the state's depleted transportation fund.

In exchange for increasing the gas tax, the Republican governor, Senate President Stephen Sweeney (D., Gloucester), and Assembly Speaker Vincent Prieto (D., Hudson) said they would phase out the estate tax and decrease the sales tax -- now 7 percent -- by 3/8 of a percentage point, both by 2018.

The deal also would increase a tax credit for the working poor and tax exclusions on pension and retirement income.

Votes on the deal are planned for Wednesday in the Senate and Assembly, according to spokesmen for the legislative chambers. If the legislation passes, Christie would have to sign it before it took effect.

New Jersey's 14.5-cent-per-gallon gas tax, the second-lowest in the country, hasn't been raised since 1988. The state's Transportation Trust Fund finances construction and repair of roads, bridges and mass transit.

Joined by Sweeney and Prieto at the Statehouse late Friday afternoon, Christie said the deal -- which he said had been reached in the previous hour -- was the product of "compromise on all sides."

"We need to responsibly finance this type of activity," he said, noting that he had rejected other tax hikes during his tenure as governor.

Christie said reauthorizing the Transportation Trust Fund for eight years at $2 billion a year would be "good for the state's economy." The previous five-year funding plan ran out in June and, after Christie and lawmakers couldn't agree how to replenish it, construction projects were halted and laborers put out of work.

Christie had pushed for a full percentage point decrease in the sales tax, but Senate lawmakers had objected, based on a projected budget hole from the cut.

Sweeney and Prieto reached an agreement this summer to raise the gas tax while cutting the estate tax, but not the sales tax. Christie didn't support that plan.

The deal announced Friday contains a smaller sales tax cut than Christie had proposed: Instead of lowering it from 7 percent to 6 percent, the tax would drop to 6.875 percent by Jan. 1, 2017. By Jan. 1, 2018 -- the month Christie is to leave office -- it would drop to 6.625 percent, according to the governor's office.

The deal also would phase out the estate tax -- a levy business groups have lobbied against -- before Christie's term ends. The current $675,000 exclusion would be replaced by a $2 million exclusion after Jan. 1, 2017, and eliminated by Jan. 1, 2018.

The state's earned income tax credit would increase from 30 percent to 35 percent of the federal credit, and the gross income tax exclusion would increase on pension and retirement income over four years to $100,000 for joint filers, $75,000 for individuals, and $50,000 for those who are married and filing separately. New Jersey veterans honorably discharged from active service would receive an exemption on state income taxes.

Christie's office said the gas tax increase would cost New Jerseyans between $184 and $276 a year, "depending on methodology." But residents will pay "hundreds less in taxes each year," according to the governor's office.

The office said the tax cuts would amount to an estimated $164 million in 2017, increasing to $1.4 billion by 2021.

The announcement was praised Friday by AAA, which said the agreement would "help restore the safety and integrity of New Jersey's infrastructure."

The motorist advocacy group urged New Jerseyans to approve a ballot question in November that would dedicate all additional gas tax revenues to the transportation fund, a measure Christie has also advocated.

New Jersey Policy Perspective, a left-leaning think tank, welcomed the transportation funding but criticized the tax cuts.

"With a long-overdue 23-cent gas tax increase, these leaders have foolishly paired a big package of tax cuts that will disproportionately benefit well-off New Jerseyans while decimating the state's ability to pay for essential services, promised obligations and other critical investments," Jon Whiten, the group's vice president, said in a statement.

(c)2016 The Philadelphia Inquirer