Gas Tax

Proponents of big and unreformed government in the Garden State are demanding hundreds of millions of dollars in tax hikes as part of a proposal to fund the now-broke Transportation Trust Fund (TFF). The New Jersey State Senate was scheduled to hold its first series of votes in over a month today, including a vote on a proposal being pushed by Senators Steve Oroho (R-Sussex) Paul Sarlo (D-Bergen), which would raise the gas tax by 23-cents per gallon.

This effort comes on the heels of an Assembly-passed plan, backed by Governor Chris Christie (R-N.J.), which would have raised the gas tax but been paired with a greater net tax reduction of the state sales tax. That plan would have reduced the state sales tax from 7 to 6 percent.

In the current fiscal year, the Oroho-Sarlo tax plan represents a $760 million tax increase.  Over ten years, this plan would result in between $3.9 and $4.5 billion in tax increases, assuming a phase-in of several tax cuts, including the estate tax repeal and an increase in tax exemptions for pension income.

For lawmakers who have signed it, voting for the Oroho-Sarlo tax plan would clearly constitute a violation of the Taxpayer Protection Pledge.

Elements of the Oroho –Sarlo plan include:

Estate Tax Phase-Out

  • An immediate increase in the exemption of estate tax income, to $2 million;
  • An phased-in increase in the exemption of the estate tax income to the federal level of $5.45 million in 2 years;
  • An planned repeal of the estate tax entirely in the years following
  • If fully phased-in, this tax reduction would equal a $4.2 billion net tax cut over 10 years.


Exemption of Pension & Retirement Income from State Income Taxes

  • Five-year phase-in of an increase in the state exemption for pension and retirement income taxes from $100,000 to $150,000 annually;
  • If phased-in this tax reduction would result in $1 billion-$1.4 billion net tax cuts over 10 years.


Increase in Earned-Income Tax Credit

  • An increase in the Earned-Income Tax Credit (EITC) to 40% of the federal level.


Significant Increase in State Gas Tax

  • A 23-cent gas tax increase, which would bring the state gas tax to 37.5 cents-per-gallon;
  • This gas tax hike would make gas sold in New Jersey roughly the 7th highest taxed in the nation, and would rise with higher gas prices;
  • When implemented, this tax hike would result in an immediate $850 million gas tax hike, increasing to over $1 billion in new and higher taxes in annually and in perpetuity;
  • Tax hike breaks down as follows: 7% Petroleum Products Gross Receipts Tax, 10-cent-per-gallon PPGRT tax on motor fuel, and a 3-cent-per-gallon PPGRT diesel surcharge imposed at the wholesale level.


The fiscal note and table can be seen here. 

Americans for Tax Reform opposes the Oroho-Sarlo transportation tax hike and urges the legislature to consider reforms that drive down the cost of building and maintaining transportation infrastructure while working to protect taxpayers from further job-killing anti-competitive tax hikes like this.