Christie signs bill raising N.J. gas tax 23 cents a gallon

By Samantha Marcus | NJ Advance Media for NJ.com
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on October 14, 2016

TRENTON   Gov. Chris Christie on Friday signed a bill raising the gasoline tax 23 cents per gallon, the first tax hike in his 2,460 days in office and the state's first increase in the tax on gasoline since 1988.

New Jersey drivers will no longer pay the second-lowest state gas taxes in the U.S., a rare exception in an otherwise high-tax state. The new, higher price will take effect Nov. 1, while corresponding sales, estate and income tax cuts will be phased in over years.

The governor on Friday also lifted the executive order shutting down statewide nonessential construction projects.

"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," Christie said in a statement.

Christie, a Republican, struck the deal with Democratic leadership in the state Legislature after months of political wrangling that resulted in a statewide construction freeze idling more than 1,000 road, bridge and rail projects and taking crews off the job at the height of construction season.

The Transportation Trust Fund, which pays for road, bridge and rail work across the state, ran out of money for new projects over the summer.

The 23-cent gas tax hike, along with increases in diesel fuels and non-motor fuels, will produce $1.23 billion annually to finance an eight year, $16 billion transportation program. A referendum on the Nov. 8 ballot will ask voters to amend the state Constitution to dedicate the new revenue to transportation projects.

Negotiations over that tax hike pitted Christie's demand for "tax fairness" and broad-based tax cuts against a bipartisan plan out of the Senate that that offered smaller, more targeted cuts that Senate President Stephen Sweeney (D-Gloucester) deemed more affordable.

The tax fight consumed Trenton in recent months, even killing a proposed referendum to constitutionally protect contributions to the public employee pension system destined for the fall ballot.

The final product, signed into law Friday, eliminates the estate tax, raises the retirement income tax exclusion, increases the Earned Income Tax Credit for the working poor, creates a tax deduction for veterans, and rolls back the sales taxes three-eighths of a percentage point.

Christie has praised the tax cuts as making New Jersey more affordable, though budget analysts questioned the soundness of giving up $1.4 billion a year while the state struggles to make ends meet and fully fund education and public worker pensions.

Moody's Investors Service weighed in, saying the lost revenue, "equivalent to 2.9 percent of current revenues, will worsen the state's existing budget challenges."

Though Sweeney agreed to the deal, his support took on a more matter-of-fact tone, pleased that it would bring an end to the shutdown and produce billions for a fraying infrastructure network, but aware of the coming budget crunch.

"I wasn't crazy about the deal," Sweeney said Thursday. "We couldn't go 18 or 15 more months without the Transportation Trust Fund. We couldn't do it. Our roads are crumbling and our people are out of work."

The slight reduction in the sales tax, from 7 percent to 6.625 percent over two years, and the elimination of the estate tax account for the biggest hit to the treasury, at $634 million and $522 million by 2021, respectively, according to the nonpartisan Office of Legislative Services.

Beginning on Jan. 1, New Jersey will no longer tax estates under $2 million. The tax will be eliminated entirely the following year.

Conservative lawmakers have long objected to New Jersey's low estate tax threshold, which they argued drives residents and their wealth. Lawmakers from both parties made a similar argument against the retirement income tax as forcing retired workers to move away from their families in favor of lower taxes.

Though dropping the estate tax will carve more than $500 million annually from the state budget, supporters hope retaining taxpayers will ultimately replace those lost revenues.

In the years long march to a transportation deal, progressive groups condemned that tax cut as a giveaway to the state's wealthiest residents.

At the same time, they successfully urged the Legislature to offset the impact of the higher gasoline tax for low-income workers with a bump in the Earned Income Tax Credit. The expansion, from 30 percent to 35 percent of the federal limit, will benefit about a half million New Jerseyans, three quarters of whom earn less than $20,000 a year.

Sen. Steve Oroho (R-Sussex), a sponsor, called the tax package a "matter of economic necessity," that will also improve the state's tax landscape.

"This is a plan that delivers tax fairness with a tax structure that is good for the economy and that provides savings for the working poor, for retirees who often live on fixed incomes, for veterans, and for parents, grandparents and small business owners who want to pass down their assets to their family," he said.

But Republican senators opposed to the deal accused the governor and other lawmakers of ignoring the concerns of New Jersey drivers, who, according to AAA, will face about $170 in additional gasoline taxes each year.

"The overtaxed people of New Jersey have demanded that we find another way to fund our transportation needs without taking more out of their pockets," said Sen. Kip Bateman (R-Somerset), who plans to introduce legislation repealing the increase.

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