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New Jersey’s Gas Tax Set to Rise Again

'Increase will virtually wipe out our advantage,' state fuel retailers group says

TRENTON, N.J. -- New Jersey’s gasoline tax is set to rise again this fall, two years after it leapt 23 cents per gallon (CPG) and took the state from having the second-lowest to one of the top 10 highest gas taxes in the nation. A local fuel retailer group is fuming over the size of the increase.

The state gas tax will increase 4.3 CPG on Oct. 1., bringing it to a total of 41.4 CPG, according to New Jersey’s Department of the Treasury. This is two years after former Gov. Chris Christie (R) signed into law a 23-CPG increase in the fuel tax to fund infrastructure. The gas tax is rising again because of a change signed into state law in 2016 that requires that the state’s Transportation Trust Fund to supply $16 billion over eight years for infrastructure improvements to roads and bridges. To do so, the state treasurer must adjust the petroleum products gross receipt tax rate (PPGR) each year, as needed, to meet the approximately $2 billion annual goal. With the 4.3-CPG increase, the PPGR will rise to 26.9 CPG. 

The administration of current New Jersey Gov. Phil Murphy (D) stated that the increase in the gas tax is out of its control and instead is a direct result of the Christie administration’s miscalculations.

“The law enacted in 2016 contains a specific formula to ensure that revenue is meeting a certain target,” said State Treasurer Elizabeth Maher Muoio. “Unfortunately, because the Christie administration overestimated gas consumption rates last year, the tax rate has to be increased by nearly 2 cents more this year in order for us to meet our obligation under the statute and fully fund the state’s many pressing transportation infrastructure needs.”

In particular, PPGR collections failed to meet targets for fiscal years 2017 and 2018, but the Christie administration failed to adjust the tax rate in 2017, Maher Muoio said. Therefore, the current administration must adjust the rate to meet the fiscal-year 2019 target of $2.0731 billion.

A Phased-In Approach?

The New Jersey Gasoline, C-Store and Automotive Association (NJGCA), Wall Township, N.J., which represents about 1,000 independent operators in the state, slammed the size of the increase.

“Increasing the tax on gas and diesel by 4.3 cents a gallon is simply too much, too fast,” said NJGCA Executive Director Sal Risalvato. “While we understand and are accepting of the need for some type of increase in order to keep the Transportation Trust Fund solvent, this dramatic of a tax increase will hurt small businesses, families and ultimately drive fuel sales even lower, creating the need for further excessive tax increases over the next several years.”

Risalvato blamed the 23-CPG increase in New Jersey’s gas tax in 2016 for the drop in fuel gallons sold over the next two years.

“Station owners near the borders and in the corridor counties have seen dramatic decreases in business as out-of-state motorists who used to make a point of stopping at New Jersey stations now no longer bother,” he said. “This increase will virtually wipe out our advantage.”

With the increase, New Jersey’s advantage over New York’s gasoline tax will be cut in half to 4 CPG, he said. Its diesel tax, meanwhile, would rise above those of New York and Connecticut. The latter’s diesel tax, for example, would be 26.5 CPG below that of New Jersey, the NJGCA said.

And because New Jersey is one of only two states that require full-service fueling, gas-station operators there would need to pass on those additional costs and be at a further competitive disadvantage to their New York counterparts, Risalvato said.

NJGCA would have preferred that the state meet the shortfall with a phased-in approach, increasing the rate by about 1 CPG per year for the next six years.

“Doing so would have better protected our competitive position and been easier for business and motorists to absorb,” said NJGCA’s associate director, Eric Blomgren. “While we met with treasury officials to provide them this option, and while we are still confident that the treasurer has the legal discretion to phase in this increase, we are disappointed they have decided to go in a different direction.”

Photo courtesy of Shutterstock 

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