New Jersey to Drastically Hike Gasoline Tax

With the Legislature’s vote and acquiescence from Republican Gov. Chris Christie, New Jersey is about to go from having the second lowest gasoline tax in the country (after only Alaska) to one of the highest.

As soon as Christie signs the bill, which he has pledged to do, or on Nov. 1 (whichever comes first), the state’s current 14.5 cents a gallon tax will go to 37.5 cents a gallon. That’s still lower than neighboring New York (49.6 cents a gallon) and Pennsylvania (41.8 cents), but will rank New Jersey seventh highest in the country in gas tax (between Connecticut and Florida), according to the Tax Foundation, a non-partisan tax study group.

Christie and the Legislature attempted to soften the blow by reducing the sales tax from percent to 6.9 percent by January and to 6.6 percent by July. It also phases out New Jersey’s estate tax, eliminating it by 2018. The state’s gasoline tax has not been raised since 1994 and the funds will go for road and bridge repair.

“With New Jersey’s transportation fund exhausted, they didn’t have many other choices,” said Joe Henchman, vice president of legal and state projects at the Tax Foundation. “The deal, which includes a sales tax cut and repeal of the estate tax but not the inheritance tax, tries to be balanced. But until New Jersey tackles local government structure and spending, it will continue to have the highest state-local tax burden and worst business tax climate in the country.”

Christie touted support for the measure, especially from business interests, re-tweeting a Chamber of Commerce statement saying the package, especially the sales tax cut, “will help residents keep more of their money and ultimately put more back into our economy, helping us build a stronger New Jersey.”

Around the nation, revenue from gasoline taxes has fallen as the price of at the pump has declined and fuel-efficient vehicles reduce consumption. A few states, including Oregon and California, are experimenting with alternative forms of transportation taxes, including a “per-mile” tax that would substitute miles a vehicle travels in the state for gallons consumed.

Congress has not addressed the federal gasoline tax of 18.4 cents a gallon, which has not been lifted in two decades and now generates 31 percent less than in 1998, according to the Institute on Taxation and Economic Policy, a nonpartisan think tank. Without federal help to pay for highways, states have been forced to act.

Since 2013, at least 17 states have either increased old-fashioned gas taxes or set up some link to inflation.