New Jersey – Gas Tax Increase

SALT Report 3869 – Gov. Chris Christie, who has long resisted raising any taxes, has battled with Democratic leaders since early summer over raising New Jersey’s gas tax, reaching an impasse that brought hundreds of highway and transit projects to a standstill that lasted months.

But on Friday, a day after a fatal train crash in Hoboken focused attention on the troubled conditions of the state-run railroad, Mr. Christie finally gave way by accepting the first tax increase during his seven years in office. He said he had agreed to raise the gas tax by 23 cents a gallon to replenish the depleted Transportation Trust Fund, which the state uses to pay for improvements to rails, roads and bridges.

Mr. Christie made the announcement at the State House in Trenton, flanked by the State Senate president, Stephen M. Sweeney, and the speaker of the State Assembly, Vincent Prieto. The three men each described the agreement as a hard-fought compromise.

The increase could take effect as soon as next week. The Legislature has scheduled a special session for Wednesday to vote on the matter.

In exchange for Mr. Christie’s acceptance of the higher gas tax, the Democrats agreed to lower the state’s sales tax by less than half a penny and to phase out the estate tax by 2018.

Mr. Christie said the sales tax rate would decrease next year to 6.875 percent, from 7 percent. In 2018, he said, it will drop again, to 6.625 percent.

He said the gas tax would pay for an eight-year, $32 billion reauthorization of the Transportation Trust Fund, adding that “$32 billion will be invested in infrastructure and improvements and modernizations in the state of New Jersey over the next eight years.”

Mr. Prieto said that the agreement “couldn’t come soon enough,” and that replenishing the transportation fund was “so important because it’s a public safety issue.”

Mr. Christie had argued for the reduction of other taxes to balance the tax burden of New Jersey residents. He had called for a 1 cent decrease in the sales tax rate, but settled for a package of cuts that would include the smaller decrease.

Along with the two-step drop in the sales tax, the Democrats also accepted a phaseout of the state’s estate tax, an increase in the earned-income tax credit for the working poor and a tax break for veterans.

The 23-cent-per-gallon increase in what the state collects on fuel sales — currently the second-lowest rate of all the states — would be the first in New Jersey in nearly three decades. It was last raised in 1988, and now only Alaska’s is lower. With the proposed increase, to 37.5 cents, New Jersey’s gas tax would be considerably higher than the national average of about 21 cents.

Mr. Christie said the trust fund would receive $2 billion a year for eight years, which he said would be its biggest and longest reauthorization. With federal matching funds, he said, the state would have $32 billion to spend on road and transit projects over the next eight years.

The governor said the tax cuts were estimated to save the state’s taxpayers $164 million next year and as much as $1.4 billion when they are completely in place in 2021.

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