While New Jersey may have the highest property taxes in the nation, it has always had the second-lowest gas tax in U.S., to offset the cost of living. On November 1st, the NJ gas tax rose for the first time since 1988 from 14.5 to 37.5 cents per gallon, making it the 6th highest in the nation.
An extra 23 cents may not appear to be detrimental in the short term, but NJ’s low gas tax was a major incentive for residents in neighboring states to visit and use NJ’s gas in order to save money. The tax increase, however, has benefits as well. Governor Chris Christie implemented it to improve New Jersey’s transportation infrastructure, as he said when announcing his tax raise “… over 32 billion dollars will be invested in infrastructure improvements and modernizations…that will be financed by a 23 cent in the gas tax”.
The Transportation Trust Fund, which pays for road, bridge, and rail work across the state, ran out of money for all projects over the summer. According the the New York Times, the tax hike will produce $1.23 billion dollars annually in order to fund the 8-year $32 billion Transportation Trust Fund and other tax cuts. As stated by nj.com, decreases in other state taxes will counteract the gas tax increase. In January, the sales tax will decline by 0.125 percent, estate tax will be eliminated for estates under $2 million, the retirement income tax exclusion will be raised, and tax will be reduced for veterans.
A typical commuter transportation bill will increase by $184 to $276 per vehicle per year which may seem excessive. Governor Chris Christie persuaded his audience to support the tax increase in New Jersey by stating that the amount of money residents spend on fixing their automobiles due to poor roads is almost equivalent to their increased taxes. Driver advocacy organizations like the AAA (American Automobile Association) support this tax hike; according to the New York Times, state and federal transportation departments state that the average New Jersey driver spends about $600 per year on vehicle repairs.
Christie explained the benefits of his plan, saying that “Through this legislation, we are continuing our commitment to providing tax relief for working New Jerseyans of all income levels, senior citizens, military veterans and property owners, while ensuring solid, reliable, state-of-the-art roads, bridges and mass transit systems.” He believes his plan will achieve the “tax fairness” he has sought.
On Election Day, the people of New Jersey voted for Ballot Question #2, that stated “all revenue from gas taxes will be dedicated to transportation projects.” This addressed a major conflict brought on by the gas tax, residents want to make sure that they are paying for their own benefits and not the incomes of government officials. This raised the question as to why New Jersey lawmakers chose to ask voters what the tax revenue could be used for instead of letting the voters decide whether or not to implement a gas tax.
However, only a few people were aware that this tax hike could be classified as an “escalator clause.” This is a clause in a contract that allows for the increase or decrease in prices under certain conditions. If the revenue projections aren’t hit with this increased tax, the tax rate will go up higher the next year in order to compensate. Opponents to this tax argue that there will be no limit to this bill. Some have also speculated that, in the long-run, the increased tax can lead to a greater production of fuel-efficient cars. This could throw off revenue projections, implementing the possibility of a higher tax rate in the future.
Although gas companies may lose some business, and automobile users’ bill will increase, most of New Jersey is willing to accept these consequences in exchange for better transportation infrastructure. Despite the tax hike, New Jersey’s gas tax remains minimally lower than its neighbors’ and those extra 23 cents may go a long way.
Graphics: Jessica Chang