Dead on arrival? New Jersey governor riled over tax plan

By Keith Goble, Land Line state legislative editor | Thursday, July 28, 2016

New Jersey Gov. Chris Christie is not happy about a proposed transportation funding fix that could reach his desk in the next week. He calls the latest effort at the statehouse to replenish the state’s Transportation Trust Fund unfair.

In an effort to shore up the $1.6 billion transportation fund for the next decade, leading Democrats at the statehouse have reached agreement on a plan to link an increase in the state’s fuel tax rates with other tax breaks.

The trust fund, which relies largely on revenue derived from the state’s gas and diesel taxes, ran out of money on July 1. Legislators have since said there is enough money available to keep the fund running until mid-August.

The gas tax now includes a 10.5-cent motor fuels tax and a 4-cent petroleum products gross receipts tax. The diesel rate is set at 17.5 cents per gallon.

All current fuel tax revenue goes toward debt service.

Senate President Stephen Sweeney and Assembly Speaker Vincent Prieto, both Democrats, have agreed to send a plan to the governor to increase the gas tax by 23 cents per gallon and raise the diesel rate by 27 cents. Setting tax rates at 37.5 cents and 44.5 cents, respectively, would provide $2 billion annually for the transportation fund.

In an attempt to appease truck drivers, the proposal would delay implementation of the diesel tax increase by six months. At that time, the diesel rate would be raised by 13.5 cents. The remaining 13.5-cent rate increase would be imposed one year after the law takes effect.

To help counter the first fuel rate increases in more than 25 years, legislators have attached multiple tax breaks to the plan. Specifically, the latest offering includes elimination of the state income taxes paid by most retirees and abolishing the estate tax. The earned income tax credit would also be increased. In addition, veterans and certain motorists would also get tax breaks.

Dropped from the plan is an agreement reached one month ago between Christie and Prieto to offset the fuel tax rate increases by reducing the state’s 7 percent sales tax by one penny.

Sweeney blocked the effort’s passage citing concerns about what a sales tax cut would do to future state budgets.

Prieto said the stalemate cannot continue.

“With efforts to negotiate a compromise with the governor stalled, I’m pleased to reach this new compromise that will provide much-needed investment in our state’s infrastructure and tax relief,” Prieto said in prepared remarks.

Christie, a Republican, says the Democratic tax plan does not represent tax fairness to the state’s residents. As a result, he said in prepared remarks the current proposal is “dead on arrival.”

“As I have said for two years, any solution for a Transportation Trust Fund must have as its foundation tax fairness. This proposal does not,” Christie stated.

Gail Toth, executive director of the New Jersey Motor Truck Association, called on state lawmakers to stop lingering on the issue.

“Shame on all of them; they should have taken care of this a decade ago,” Toth told Land Line. “We had a blue ribbon commission 10 years ago that put out recommendations. Everyone got on board. The plan, which was doable for everybody, was to raise the fuel tax by a nickel over four or five years.”

Instead, Toth said politicians have been afraid to raise the fuel tax.

“They will raise everything else but the fuel tax. Because of that, even though everyone supported the blue ribbon panel’s recommendations 10 years ago, nobody had the decency to just do it. Politically, they thought it would be disastrous. So, 10 years later we are out of money. ... Now, it’s all over. They have to do something.”

The full Senate could vote on the revised plan as early as Monday, Aug. 1. If approved there, it would head to the Assembly for final consideration before moving to the governor’s desk for his expected veto.

Toth said it is unclear whether Sweeney and Prieto have a veto-proof majority. “Honestly, we don’t know where this is going.”

To view other legislative activities of interest for New Jersey, click here.

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