NEW BRUNSWICK, N.J. -- As the federal government searches for a long-term solution to infrastructure funding, states continue to wrangle over their own revenue raising approaches.
In New Jersey, where the fund that supports infrastructure improvements is set to go bust by next summer, some are suggesting extending the state's sales tax to gasoline. At a recent hearing of the Assembly Transportation, Public Works & Independent Authorities Committee, members discussed a proposal that would apply the 7% state sales tax to gasoline purchases to help raise revenue for infrastructure improvements.
The hearing was part of a series that is examining how to fill the state's drained Transportation Trust Fund.
Currently, this trust fund is fed by New Jersey's gas tax of 14.5 cents per gallon (CPG), state highway tolls and part of the state sales tax levied on non-gasoline purchases.
The trust fund has spent $1.6 billion this year, reported NJ.com, but most of it has gone to service debt on earlier projects. Funds for new projects are expected to run out by July 1, 2015, which is the beginning of fiscal year 2016.
Gordon MacInnes, a former Democratic state senator and president of New Jersey Policy Perspective, a nonpartisan research group that examines public policy issues in the state, proposed the state sales tax idea at the hearing. While he acknowledged the unpopularity of new taxes, MacInnes said the potential revenue from a 7% sales tax on gasoline could generate $1.2 billion annually, assuming an average retail price of $3.25 per gallon. This is close to the amount generated under the current setup.
This spring, state senator Ronald Rice (D) proposed a bill that would swap the current gas tax with a 7% tax on gasoline purchases, essentially extending the sales tax to fuel while eliminating the gas tax, according to the report.
MacInnes proposed the extension of the sales tax to gasoline as an alternative to increasing the gas tax, which has remained at the same level since 1988 and is among the lowest in the country. Under a sales tax structure, revenues under this setup would vary by the price of gasoline.
Committee chairman John Wisniewski (D) supports the idea of a mix of revenue sources to replenish the trust fund, which could require up to $2 billion in additional revenue per year. He and other members of the committee appeared open to the sales tax extension as one revenue source among many.
"I would like to see at the end of the day that we can come up with a multi-pronged approach," said Assemblywoman Sheila Oliver (D).
Polling suggests that New Jersey residents are becoming less resistant to the idea of a gas tax increase. A Rutgers-Eagleton poll recently found an eight-point drop from April in the percentage of respondents who opposed increasing the gas tax, hitting 58%.
And Governor Chris Christie is also apparently opening up to the idea of a gas tax increase, said the report, noting that no approach of raising additional revenue for transportation was "off the table."
Click here to view the full NJ.com report.
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