Possible 27-cent diesel tax increase in New Jersey

By Keith Goble, Land Line state legislative editor | 8/1/2016

As a possible governor’s veto looms, a New Jersey Senate panel has advanced a proposed $2 billion transportation funding fix that would nearly triple the state’s existing fuel tax rates.

In an effort to shore up the state’s $1.6 billion Transportation Trust Fund for the next decade, the Senate Budget and Appropriations Committee voted 8-3 on Friday, July 29, to support a plan to link an increase in the state’s fuel tax rates with other tax breaks.

Senate President Stephen Sweeney and Assembly Speaker Vincent Prieto, both Democrats, agreed to push forward with the plan after a previous deal with Prieto and Republican Gov. Chris Christie to include a state’s sales tax reduction was stalled in the Senate.

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, including the gross receipts tax, is set at 17.5 cents per gallon.

All current fuel tax revenue, however, goes toward debt service.

The current plan awaiting a Senate floor vote as early as Monday would 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.

Gail Toth, executive director of the New Jersey Motor Truck Association, said advocates for the diesel tax increase are either fooling themselves or do not care how it will affect trucking operations.

“Their mindset is ‘you’re going to pass it on anyway,’” Toth told Land Line. “So, as a result everyone is going to pay more for everything – milk, groceries ... everything. Politicians don’t want to emphasize that fact.”

To make matters worse, she adds it appears that politicians have yet to figure out that nobody has more money to give.

“They have bled us all dry, and they keep coming back to the trough and think they will find it somewhere.”

To help counter the first fuel rate increases in more than one-quarter century, 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 was an agreement reached one month ago between Christie and Prieto to offset the fuel tax rate increases by offering tax breaks that include 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.

The governor has made his disappointment clear about the current version that could reach his desk by the end of this week. He calls the latest effort at the statehouse to replenish the state’s Transportation Trust Fund unfair.

Christie 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 said in a news release.

Prieto said the stalemate cannot continue.

If approved by the full Senate, the proposal would head to the Assembly for final consideration before moving to the governor’s desk for his expected veto.

Toth said it is unclear if 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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