Garden State Lawmakers On Verge of Passing Massive Gas Tax Hike

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Posted by Paul Blair on Monday, June 27th, 2016, 7:21 AM PERMALINK

A bill to immediately raise the gas tax by 23 cents per gallon could be brought to the floors of the New Jersey state Senate and Assembly as early as this week, after passing out of their respective Budget committees last Thursday. Sponsored by Senators Steve Oroho (R-Sussex) and Paul Sarlo (D-Bergen), the bill (Senate Bill S2412) would raise the net tax burden on New Jersey residents by more than $500 million annually.

 The Bad: Gas Tax Hikes.

  • The plan would immediately raise the state gas tax from 14.5 cents per gallon by 23-cents to 37 cents per gallon, making it roughly the 7th highest in the nation. This 23 cents is calculated based on a new 12.5 percent sales tax imposed up on the current average price of gasoline. The tax would rise with higher gas prices.
  • The current 14.5-cent gas tax is made up of a 10.5-cent per gallon tax on motor fuels and a 4-cent Petroleum Products Gross Receipts tax. 
  • Not all of the currently collected gas tax revenue goes to the Transportation Trust Fund (TFF), which runs out of money on July 1. 
  • The current gas tax is projected to raise $750 million this year and a 23-cent increase would add another $1.4 billion to state coffers per year.


The Illegal: Diverting Airport Revenue to Roads and Bridges.

  • There is a provision of this legislation, which raises the effective excise tax rate imposed on jet fuel 25-fold. 
  • The New Jersey jet fuel tax is currently applied to gallons of fuel used on taxiing and takeoff (the burn-rate method), resulting in an effective tax rate of .4 cents per gallon. 
  • This proposal would raise that tax to 10-cents per gallon, a 25-fold increase. 
  • Mandating that any of this money be diverted to roads, highways, bridges or any other non-aviation purpose would violate Federal law prohibiting the diversion of airport revenue. Read more on that here.
  • A plaintiff against the state would likely win this lawsuit, resulting in a $170 million loss of anticipated revenue immediately after this tax hike passes. 


The Good. Death Tax Phase-Out and Other Cuts. 

  • The legislation begins the phase-out the estate tax over three years, a $540 million per year tax cut once fully implemented.
  • Residents filing jointly will not have to pay income taxes on retirement income, including pensions, up to $100,000, up from $20,000.
  • Creates a new tax deduction for charitable giving.
  • Voters will be asked this fall to constitutionally dedicate existing and future gas tax revenue to transportation. 


If fully phased in, the total tax cuts being considered equal about $850 million per year compared to $1.4 billion in gas tax hikes. 

This legislation does nothing to address the cost-drivers and structural issues within the Transportation Trust Fund. If proponents of a gas tax hike are serious about the Garden State’s real transportation needs, they will re-examine the rampant waste within the system and the types of public projects funded by the state. 

Instead of requiring commuters to fork over more of their hard-earned income, New Jersey lawmakers should modernize the state’s prevailing wage laws, re-examine union contracts, and introduce real competition into the bidding and contract process for transportation projects. Until then, tax hikes should be a non-starter for negotiations about short or long-term transportation needs.

Americans for Tax Reform opposes this legislation and urges the legislature to reject Senators Sarlo and Oroho’s shameless gas tax cash grab.  

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