If N.J. Gas Tax Is Raised, Tax Credits For Poor Should Be Restored, Group Says

NJ.com — Wednesday, January 21, 2015

By Samantha Marcus | NJ Advance Media for NJ.com

TRENTON — A left-leaning New Jersey think tank today urged lawmakers to spare some residents from the full brunt of an increased gas tax by restoring cuts to a low-income tax credit.

Increasing the gas tax would have a disproportionate effect on the poorer households that studies show already pay a larger share of their income in taxes, New Jersey Policy Perspective said in a report released today.

"These are people who are struggling to meet the basic necessities everyday," said NJPP President Gordon MacInnes. "The increase in the gas tax will certainly impact them, particularly if they rely on driving to work."

Democratic lawmakers have targeted an increase in the gas tax as a way to shore up the Transportation Trust Fund, whose cash for new projects is being crowded out by debt payments.

The trust fund's source of revenue, the 14.5-cents-a-gallon gas tax, is the second lowest in the country and hasn't been raised since 1988.

Assemblyman John Wisniewski (D-Middlesex) has proposed increasing the gas tax by at least 25 cents a gallon to generate an additional $1.25 billion a year for the nearly broke trust fund. State Sen. Raymond Lesniak (D-Union) wants to raise the gas tax by 15 cents a gallon over three years.

Proposals to raise the gas tax are unpopular with New Jersey residents: 68 percent of whom oppose an increase, according to a January Fairleigh Dickinson University PublicMind poll. Just 28 percent of the 803 adults polled were in favor.

"The polling suggests that people don't want to see tax increase. This is the least biggest surprise in history," said MacInnes, who called for a stable source of revenue.

Seizing on the poll, Americans for Prosperity New Jersey today issued a statement opposing a gas tax hike and imploring lawmakers not to "exploit" the temporary drop in gas prices.

A gas tax hike would cost households earning less than $45,000 a year a larger share of their income than any other income level, according to the NJPP report.

Households with income less than $23,000 a year would see a half of one percent increase in taxes paid as a share of their income, compared with one-tenth of one percent increase for those earning more than $121,000, according to the report.

Boosting the tax credit from 20 percent of the federal tax credit to 25 percent for certain low-income workers and families would return as much as $350 a year to those households and cost the state $57 million annually.

Ann Vardeman of New Jersey Citizen Action said the credit may not seem like much, but it's equal to a week's worth of work for someone making minimum wage, or groceries for a month or catching up on utility bills.

"If policymakers are going to consider a tax increase, a regressive tax increase that disproportionately affects low-income people, it would not only be unconscionable not to fully restore the state's Earned Income Tax Credit to 25 percent, but really we should be talking about raising it," she said.

While calling for the increased EITC to offset a gas tax hike, MacInnes and NJPP criticized those who would couple it with cuts to the estate and inheritance tax.

"Pairing a much-needed gas tax hike with a reduction in or elimination of New Jersey's estate or inheritance taxes, as several lawmakers have suggested, makes little sense," the group said in a report. "Cutting the estate or inheritance taxes would drain the general fund and give a tax cut to the very households that stand to feel the least impact of the gas tax hike."

A spokesman for Gov. Chris Christie did not immediately respond to a request for comment.

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