Revenue from Gas Tax Down, NJ Looks at Alternative

Gas tax could be in for a hike, but New Jersey and several other states consider a mileage fee instead of a fee on gas consumption

It’s pothole season. East Orange Public Works officials are deployed along Oraton Parkway to fill in several nasty roadway booby traps, while, back at the garage, Gov. Phil Murphy announced $161 million in Transportation Trust Fund aid for infrastructure projects in 537 towns across the state.

East Orange got $1.2 million. “We got almost 30 to 40 streets that we have to do. This will really aid us in getting those streets done,” East Orange Mayor Ted Green said.

Drivers pay for it at the pump. When they fill up, New Jersey’s gas tax fills the Transportation Trust Fund. But tax revenues look like they’re falling short of this year’s $1.5 billion highway fuels revenue target, the state treasurer said in budget hearings last week.

The bad news is that a shortfall could trigger yet another hike in the gas tax to make up the difference, unless people buy lots more gas in New Jersey over the next few months.

“The reality of the world we’re living in is that gas consumption will go down over time, just with the advent of hybrid and electric vehicles, and the change of habits by the next generation,” Murphy said.

That would only accelerate the rise in New Jersey’s gas tax. It went up 4.3 cents last October to more than 41 cents a gallon. That’s why New Jersey — and New York — are part of an East Coast coalition that’s exploring a user fee, based not on the gas you buy, but rather, on the number of miles you drive.

Is replacing the gas tax feasible?

“We may need to think of a different mousetrap to capture the movement around this state, and there are some other states looking at that, in terms of mileage fees, as opposed to gas consumption fees,” Murphy said.

The I-95 Corridor Coalition will soon run a mileage-fee program including North Carolina, Pennsylvania, Virginia, Delaware and New Jersey. That’s to “see is a mileage-based usage fee even technically feasible? Is it something that we can we go to as a replacement for the fuel tax,” said I-9 Corridor Coalition executive director Patricia Hendren.

Study participants would get a device they plug into their car’s data port, or use smartphones, to measure miles driven and then they get a bill. In 2015, Oregon launched a mileage-fee program that charges 1 1/2 cents per mile, and participants there get gas tax refunds. It’s a different concept — one New Jersey undoubtedly will consider, with more electric vehicles on the road.

“To treat all … drivers equally is something we definitely have to look at, because I was talking to Senator Oroho about it the other day. It’s just… not fair, you know, because why am I being taxed, and you’re not?” said Senate President Steve Sweeney.

“I’d take a look at a plan as long as you reduce the gas tax,” said Republican leader Assemblyman Jon Bramnick. “It’s the first I’ve heard of it. But I’m not going to support any type of user fee, at this point.”

The state treasurer ultimately will decide if the state’s gas tax will go up this year.