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New Jersey’s Gas-Tax Impasse

As transportation fund set to soon go bust, plan to raise tax 23 CPG faces stiff opposition

TRENTON, N.J. -- Most New Jersey lawmakers can agree that the state’s Transportation Trust Fund is in big trouble. What they can’t agree on is how the gas tax fits into the solution. fuel pump nozzles

The fund, which supports the repair and maintenance of roads, bridges and rail networks in the state, is set to run out of money for new projects at the end of this month. This is when the current five-year program expires.

New Jersey’s 14.5-cents-per-gallon (CPG) gas tax—the second lowest in the country—has provided some of the funding, and the state has borrowed the rest. However, as NJ.com explains, while governors have raised the borrowing limit over the years, they have not touched the gas tax since 1988. The result: New Jersey has grown increasingly in debt as it attempts to keep the transportation fund afloat.

Lawmakers have proposed several plans to right the ship. The latest would raise the gas tax by 23 CPG to reach 37.5 CPG. Meanwhile, the diesel tax would grow 26 CPG. Only Pennsylvania, Washington, New York, Hawaii, California and Connecticut would have higher taxes. While this would give New Jersey the seventh-highest gas tax in the country, it would also raise an additional $400 million in funding, for a total of $2 billion annually, for the transportation fund.

Gov. Chris Christie (R) has not ruled out a gas-tax increase, but insists it must be offset by tax cuts elsewhere. One bipartisan plan announced last week would offset the gas-tax increase by phasing out the estate tax and relieves some New Jerseyans of paying tax on retirement income. Residents also could deduct gas taxes paid from the state income tax once they exceed 1% of their income, as well as charitable donations. And the plan would raise the Earned Income Tax Credit, which benefits low-income households, by 10 percentage points.

According to one of the sponsors of the plan, Sen. Paul Sarlo (D), the state would break even on these cuts until 2020 thanks to economic growth.

However, this week, Democratic opponents criticized the plan, calling it a “shell game” that mostly hurts the poor, while Republicans argued it was not sufficient to make up for a nearly 160% increase in the gas tax. Christie has also denounced the plan, saying it does not meet his standards of “tax fairness.”

Sal Risalvato, the executive director of the New Jersey Gasoline, C-Store and Automotive Association, which represents hundreds of gas stations in the state, has steadfastly opposed any increase in the state gas tax for the past three decades. However, last year, he announced support for raising the gas tax because of the woeful state of the transportation fund. His preference is to raise the rate per gallon, while lowering or eliminating another tax.

But as he recently told MarketWatch, Risalvato did not know how to end the current legislative impasse.

“The state is in a pickle,” he said, “and I don't have another solution to offer.”

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