The New Jersey Senate and Assembly on Oct. 7 approved legislation that will increase the state gas tax by 23 cents per gallon and the diesel tax by 27 cents per gallon effective Nov. 1, 2016, for an additional $16 billion in transportation funding over the next eight years. The two bills are expected to end a three-month political battle that has sidelined thousands of jobs and delayed more than $40 million in transportation construction work.
In addition to increasing transportation funding, the agreement decreases the state sales tax by three-eighths of a percentage point, cuts the estate tax, and provides state income tax exemptions for retirement income. The legislation will also raise the earned income tax credit for low-income families from 30 percent to 35 percent.
The administration of Gov. Chris Christie (R) estimates the typical New Jersey driver (traveling an average of 12,000 miles per year with a vehicle that gets 25 miles per gallon) will pay an additional $110 per year in state motor fuel taxes. Critics of the bill stated that the offset tax cuts would be too much of a burden on the state’s General Fund and favored wealthier residents. They also argued that the measure did not include enough reform to ensure the revenue will be allocated equally and spent as intended.
All non-essential, state-funded transportation work has been frozen since July 8 while state leaders negotiated a way to provide new revenue for the depleted Transportation Trust Fund. Estimates from Forward NJ found that the crisis cost the state 4,200 in lost jobs, $41 million in work stoppage costs, and $9 million in weekly lost sales and wages.
The state Senate approved the spending bill (A 10) with a vote of 23 – 14, with the state Assembly following 45 – 27. The funding bill (A 12) was approved by the Senate 23-14, and by the Assembly 44 – 27. Gov. Chris Christie (R) is expected to provide final approval within the next two weeks. Once the legislation is signed into law, New Jersey will become the 17th state to increase taxes on motor fuel for transportation funding since 2013.