A Republican Plan to Raise Gas Tax and Refuel Transportation Trust Fund

John Reitmeyer | June 7, 2016 | Transportation
Bumping up the gas tax by about 20 cents, according to Sen. Oroho, would keep fund solvent, but he wants to see tax cuts in return

Sen. Steve Oroho (R-Sussex) speaking to reporter's inside the State House about why the state should increase the gas tax to renew the Transportation Trust Fund.
Democrats, who control the Legislature, have said for months that hiking the gas tax is the best way for New Jersey to keep its Transportation Trust Fund from soon going broke. But it was a Republican senator from conservative Sussex County who stepped forward yesterday with what to date is the most detailed plan to keep the Trust Fund solvent.

Sen. Steve Oroho, a respected member of the Senate Budget and Appropriations Committee, stressed that by increasing the gas tax by roughly 20 cents, new revenue would be raised for transportation projects. Ultimately, that would prevent New Jersey taxpayers from being forced to subsidize the many out-of-state motorists who currently use its roadways.

To go along with a raised gas tax, he wants a series of new tax cuts and a new income tax credit for gasoline purchases to help make the state more affordable over the long run for residents, he said.

“This is not a political presentation, this is a financial presentation,” Oroho said yesterday while outlining his plan during a State House news conference.

The senator’s proposal drew praise from Democratic lawmakers who have also been working hard on a Trust Fund renewal plan before the fund’s current five-year financing plan runs out on June 30.

But it also came as another Republican lawmaker, Sen. Jennifer Beck (R-Monmouth), held a rally in Tinton Falls to stoke opposition to increasing the gas tax. (Public opinion polls continue to show most New Jersey voters remain opposed to a gas tax hike). Whether enough Republicans will ultimately see things the way Oroho does remains to be seen.

Right now, New Jersey levies a 10.5-cent per gallon tax on gasoline and another 4-cent per gallon tax on the gross receipts of petroleum products to help fund $1.6 billion in annual state spending on road, bridge and rail-network improvements. But after June 30, those taxes will generate only enough money to help pay off the Transportation Trust Fund’s significant debt, leaving no money for new projects.

The Trust Fund has also already reached its authorized borrowing ceiling.
Beck and others have suggested the state can go forward for the next several years without raising any fuel taxes by carving out money from the general budget and borrowing more — revenue sources that critics have said may never materialize.

But Oroho made the case yesterday that the best option is to increase the fuel taxes. That way the burden will be shared by out-of-state motorists, who pay between 30 percent and 40 percent of gas taxes, according to AAA New Jersey. His approach could also impact large oil companies and possibly even those using pricy jets to travel, Oroho said.

He said turning to the gas tax for new revenue would mean local governments would also be protected from the possibility that the state could eventually shift the cost of fixing county and municipal roads down to the local level.

The state’s current five-year transportation-finance plan – written by Gov. Chris Christie in 2011 — relies on revenue from the New Jersey Turnpike Authority and the Port Authority of New York and New Jersey that may not be available going forward. It also banked on using hundreds of millions of dollars in revenue from the annual budget that Christie instead decided to spend on other items.

Oroho, armed with a series of charts to make his point, said local property taxpayers could be facing as much as $10.6 billion in additional costs over the next 25 years. And since borrowing for local capital projects is exempt, the state’s 2 percent cap on property tax hikes would be powerless to stop that increased spending on transportation.

“That is the property tax explosion I am trying to educate people about and fix,” Oroho, a certified public accountant and financial planner, told reporters yesterday.

He said the proposed tax cuts in his plan would help make New Jersey more affordable for current residents and stop what he said has been a net outflow of capital from the state over the past decade.

His tax cuts include phasing out New Jersey’s estate tax; lifting income tax exemptions on retirement income sources like pensions and 401(k) plans; and creating a new state income tax deduction for charitable contributions. Oroho would also like to offer in-state motorists a state tax credit for gasoline purchases.

Under his plan, he said a typical retired couple that drives 15,000 miles a year may pay $150 more for gas at the pump but save more than $1,000 from the proposed tax cuts. And even as the state may lose income initially because of the proposed tax cuts, Oroho said it would eventually make back money as more residents, particularly those in the highest income brackets, choose not to leave New Jersey for lower-tax states. “We don’t even have to count on them coming back, we just have to do a better job of not losing them,” he said.

New Jersey’s gas tax, which has not been increased in nearly 30 years, would still remain lower than other neighboring states like New York and Pennsylvania, which levy per-gallon taxes of 45.9 and 51.6 cents, respectively.

Oroho’s plan was praised yesterday by Senate Budget and Appropriations Committee Chair Paul Sarlo (D-Bergen), who called it a “huge step forward.” Lawmakers, who have been trying to find a bipartisan solution to the transportation-funding crunch while Christie largely sits on the sidelines, ultimately would like come up with enough votes to sustain a gubernatorial veto.

“I think we’re getting closer and closer on the details in the Senate,” said Sarlo, who has also proposed crafting a broad funding plan that includes cuts like those outlined by Oroho.

As well as holding a rally in opposition to any increase in the gas tax, Beck launched an online petition. She has been promoting her own transportation-funding plan, which relies primarily on new borrowing and freeing up cash within the budget by forcing public workers to accept less generous health coverage.

The latest public opinion poll from Quinnipiac University found people in New Jersey largely share her view of the gas tax, with opposition measured at 54 percent of the state’s voters.

Beck, who said about 50 people attended her rally, questioned Oroho’s estimates of how much revenue could be raised from out-of-state motorists if the gas tax is hiked, saying she’d like to see more data on that issue.
“There are many different ways to approach funding the Transportation Trust Fund, I’m just opposed to raising the gas tax,” she said.