A newly released bipartisan plan to replenish New Jersey’s going-broke Transportation Trust Fund calls for a more than doubling of the per-gallon tax that motorists here currently pay at the pump. But it’s how the same plan would impact other taxes, including New Jersey’s notoriously high property tax bills, that its sponsors and supporters are hoping will drive the debate in the State House over the next few weeks.
The Transportation Trust Fund renewal initiative unveiled by state Sens. Paul Sarlo (D-Bergen) and Steve Oroho (R-Sussex) on Friday would replace a five-year, $8 billion finance plan that expires at the end of the month with a more ambitious 10-year, $20 billion plan that would take effect on July 1. Both senators said their plan would mean upgrading the state’s crumbling roads and bridges while also adding to the infrastructure by expanding light rail into Bergen and Gloucester counties. The transportation spending is also intended to provide a boost to the state’s economy and keep local governments from being forced to raise property taxes to pay for road and bridge maintenance.
The plan would be funded with a blend of revenue raised from borrowing and from a set of proposed fuel-tax hikes that, though largely levied at the wholesale level, would likely result in the state’s current, 14.5-cent per-gallon gas tax increasing to 37.5 cents per-gallon. Jet-fuel taxes would also go up, and all of the new revenue from the fuel-tax hikes — an estimated $1.36 billion annually — would be constitutionally dedicated to road, bridge, and rail-network projects. Electric car owners would also face new $150 annual fees as part of the senators’ plan.
But the proposed legislation to enact the gas-tax plan also includes a series of proposed tax cuts that are designed to make New Jersey more affordable, particularly for seniors, low-wage workers, and others who would be hit the hardest by the increased fuel taxes.
Transportation advocates and the labor community praised the plan after it was released Friday, but activists from the left and the right also criticized some of the specific elements. And Assembly Democrats issued their own transportation-funding framework on Friday that shows leadership in each house is at least in agreement on the broad strokes. Whether lawmakers can ultimately come up with a final deal that Gov. Chris Christie and other Republicans wary of a tax hike can live with remains to be seen.
“We are calling on all of our colleagues on both sides of the aisle in both houses to support it,” Sarlo said on Friday.
And Senate President Stephen Sweeney (D-Gloucester) said in a meeting with NJ Spotlight editors and reporters on Friday that he’s aiming for a veto-proof majority, at least in the Senate, with Oroho’s involvement likely a factor in winning votes from the other side of the aisle.
Right now, New Jersey’s gas tax is the nation’s second-lowest, with a 10.5-cent per-gallon tax on gasoline sold at the pump and a 4-cent per-gallon petroleum products gross-receipts tax on motor fuels and some nonmotor fuels that is levied on refineries and distributors and then passed along to motorists. But those taxes will only produce enough revenue beginning July 1 to pay off the Transportation Trust Fund’s significant debt, leaving no money at all for new projects.
The senators’ plan to renew the fund would leave the current tax 10.5-cent tax on gasoline at the pump untouched, but a new 7 percent tax would be levied at the wholesale level on motor fuels that would function much like sales tax. At current gas prices, that new 7 percent tax would equal about 13 cents more per-gallon.
The plan also calls for the same new charge on jet fuel and some nonmotor fuels. And it would also add 10 cents to the gross receipts tax levied at the wholesale level and hit diesel sales as well.
At the end of the day, if passed without any changes, the proposed fuel-tax changes would likely increase New Jersey’s per-gallon gas tax to 37.5 cents, which would be seventh-highest among all states. But the senators stress New Jersey would still charge less than what motorists pay at the pump in Pennsylvania, where the state gas tax is 51.60 cents, and in New York, where the state gas tax is 45.99 cents. That gap, Sweeney said, would still remain large enough to entice out-of-state motorists to fill up in New Jersey.
And since an estimated 30 percent of the current revenue comes in from out-of-state drivers and truckers, the senators argue it would also require those motorists to contribute toward maintaining New Jersey’s infrastructure for the next decade.
“The plan we have put together will save hundreds of millions of dollars for New Jersey taxpayers by ensuring that out-of-state drivers who use our roads pay their fair share for their upkeep,” said Oroho, who raised a similar concern last week during a news conference on the transportation-funding issue held last week.
The senators’ plan would also ease the state’s reliance on large subsidies from the New Jersey Turnpike Authority and the Port Authority of New York and New Jersey. Reliance on the state sales tax beyond a $200 million annual dedication that’s been in place since the 2004 fiscal year would also be eased. This year the state budget is providing the trust fund with $546 million in revenue from the sales, according to the nonpartisan Office of Legislative Services.
But it’s the tax-relief components of the plan that the sponsors and supporters are hoping will get much more attention in the coming weeks, including a proposed doubling of state transportation aid for county and local governments.
The local governments have had to operate within a 2 percent cap on property tax hikes since 2011, but they’ve been able to borrow for road and bridge repairs outside of that cap. The senators’ plan would increase the annual transportation aid from $200 million to $400 million, and also create a local infrastructure bank, all with the goal of helping local governments control property tax bills that rose to a record-high average of $8,353 last year.
Also on the tax-relief side of the plan is a proposal to increase the Earned Income Tax Credit for low-wage workers from 30 percent of the federal credit to 40 percent of the federal credit. That proposal also has support from the Democratic leaders in the Assembly. And their framework also calls for the creation of a new transparency website to keep track of infrastructure spending.
A new income tax credit for those paying more than 1 percent of their total income on gasoline taxes would also be created to help offset the burden of higher gas tax on lower-income residents. The state would also create a new income tax credit for contributions made to charitable organizations, but it will initially be limited to just those providing social services like homeless shelters and food banks.
And for retirees, the state would lift its income-tax exemptions on pensions, annuities, 401(k) plans and other sources of retirement income over the next several years. That would mean exemptions that are set right now at $15,000 for individuals and $20,000 for couples would eventually rise to $50,000 and $100,000.
But the biggest proposed tax cut would phase out New Jersey’s estate tax by the end of 2019. Right now, New Jersey has the lowest estate-tax exemption in the nation, at $675,000, and the tax itself generates an estimated $400 million to $500 million annually.
Adding the phase-out of the estate-tax to the transportation-funding plan provides a big test for Christie, a second-term Republican, because he’s called for an elimination of the estate tax this year and has also been critical of prior efforts that would have taken longer to get rid of the tax.
Sweeney, the Senate president, he’s now preparing for a Christie veto.
“It’s important to have a bipartisan process here because we do expect the governor to veto this thing,” Sweeney said.
Assembly Minority Leader Jon Bramnick (R-Union), speaking during a Friday appearance on NJTV’s nightly newscast, warned that not everyone from his party will be onboard with a tax hike. But he also added that, with lawmakers also talking about making broad tax cuts, there will be some interest among GOP lawmakers.
“I’m pleased as to what I see,” Bramnick said. “I think we’ll be able to get there, at least with some Republicans.”
The plan was also praised by Forward New Jersey, a coalition of labor and business leaders that has been working hard for over a year to see a resolution to the looming trust-fund expiration.
“We look forward to working with legislative leadership over the next two weeks to ensure the TTF, which expires June 30, is resolved,” said Tom Bracken, the president of the New Jersey Chamber of Commerce and chair of Forward New Jersey.
But Sen. Jennifer Beck, a Republican from Monmouth County who has released her own plan to renew the trust fund without raising taxes, issued a statement promising “steadfast opposition” to the proposed 23-cent increase. Beck’s plan would instead rely on borrowing and money carved out from the general budget to spend $1.6 billion annually over seven years.
“The answer to high taxes is not higher taxes,” she said.
Analilia Mejia, executive director of NJ Working Families, issued a statement that took issue with the inclusion of the estate-tax phase-out in both the senators’ plan and the Assembly Democrats’ framework, saying it threatens to shortchange valuable state-funded programs.
“Neither plan is beneficial to the working men and women of this state who demand tax fairness that raises up families and that doesn’t place our education, healthcare, and public services in an even more precarious position,” she said.