NorthJersey.com

N.J. Gas Tax Increase Widely Criticized; Vote Set For Today

The Record (NorthJersey.com) — October 5, 2016

By SALVADOR RIZZO
state house bureau |
The Record

Conservatives and liberals alike are up in arms over a deal Governor Christie struck with Democratic lawmakers to raise New Jersey's gas tax by 23 cents a gallon this year to finance statewide transportation upgrades.

Assembly and Senate lawmakers are scheduled to vote on the transportation package today — one of the broadest pieces of legislation the State House has seen in years.

Members of the public will have no chance to weigh in because no committee hearings are scheduled before the votes. As of Tuesday afternoon, the legislation itself had not been made final and the non-partisan Office of Legislative Services had not been able to analyze the potential fiscal impact.

As part of a sweeping deal Christie announced Friday afternoon, the gas tax would rise by 23 cents this year — to 37.5 cents a gallon — with the potential to rise more in coming years.

Christie's plan also would phase out New Jersey's estate tax by the time he leaves office in January 2018 and make a slight cut of less than half a penny to the sales tax, from 7 cents on the dollar to 6.625 cents.

The bottom line: New Jersey would take a bigger bite out of millions of commuters and visitors who stop for gas. Meanwhile, the phase-out of the estate tax would give a reprieve to the estimated 3,500 annual filers who leave behind assets of $675,000 or more.

"I call it insanity," said state Sen. Raymond Lesniak, D-Union, a potential candidate for governor next year and one of the state's most liberal lawmakers. He called for the gas tax hike to be phased in over several years and for increased oversight over New Jersey's transportation agencies. "This is an assault on the taxpayers of the state of New Jersey," Lesniak said.

State Sen. Michael Doherty, R-Warren, one of the state's most conservative lawmakers, said the gas tax would rise by "158 percent" at a time when state residents already face some of the highest tax rates in the country.

"I guess some people aren't satisfied with New Jersey having the third-greatest tax burden in the nation," Doherty said, citing figures from the non-partisan Tax Foundation. "They won't be happy until we're No. 1."

The transportation deal with Christie marks a 180-degree turn on tax policy for New Jersey's top Democratic lawmakers, Assembly Speaker Vincent Prieto and Senate President Stephen Sweeney.

The two lawmakers spent years complaining that New Jersey's schools, public-employee pensions and other programs were seriously underfunded. They passed a higher tax on millionaires five times after Christie took office to round up more revenue for the $34.5 billion state budget. Christie vetoed the tax at every turn.

But on Friday, Prieto and Sweeney agreed to remove an estimated $1.4 billion from the state's annual revenue base after all the tax cuts are phased in by 2021.

Prieto and Sweeney said Friday that they expect to have enough votes from both parties to pass the gas tax hike and other measures today.

Christie's transportation deal, and a separate constitutional amendment scheduled for November's ballot that would dedicate all gas-tax revenue to transit projects, would devote $16 billion in state revenue for road, bridge and railway upgrades over the next eight years. Another $16 billion would come from federal matching funds. An extension of light rail into Bergen County — extending the line from North Bergen to Englewood — would be funded by the new transit program, Sweeney said.

"The benefits of such an agreement are well-known: safer roads for New Jersey residents, job creation at a time the state needs it, billions of dollars of investment that will benefit residents and businesses, and taking necessary steps to ease the tax burden of hardworking New Jersey families," said Tom Bracken, the president of the state Chamber of Commerce and chairman of Forward NJ, a coalition that has long called for increased transportation funding.

Sweeney, a potential candidate for governor next year, had opposed an initial plan to cut the sales tax from 7 percent to 6 percent in exchange for the 23-cent gas tax increase. At $1.7 billion, the cost to the state budget was too onerous, he said this summer. Instead, Sweeney proposed to increase the threshold for when the estate tax kicks in, from the $675,000 now to $5.43 million, the same as the federal level.

In the end, Sweeney agreed to a full repeal of the estate tax, a reduction in the sales tax from 7 percent to 6.625 percent and increased exemptions for retirement income. At $1.4 billion, the cost to the budget still would be onerous.

The $34.5 billion budget is insufficient to fully pay for school and pension costs mandated by law. Christie has shorted those programs for years, leading to a flurry of lawsuits. If the tax reductions go through, the next governor would have even fewer resources to tackle New Jersey's long-festering financial problems.

Vocal opposition

The New Jersey Education Association, one of New Jersey's largest public-worker unions, opposed the deal at a news conference with liberal groups Tuesday that included the Working Families Alliance, the Sierra Club and consumer rights group New Jersey Citizen Action.

"Increasing the gas tax in some way makes sense, but it's absolutely irresponsible to negotiate a deal that raises this tax while reducing other state revenues so dramatically," said Ed Richardson, NJEA's executive director. "This comes at a time when essential services that support our most vulnerable residents, struggling families, our public school children, are not being funded now."

Conservative groups, meanwhile, said the gas tax hike would be too steep for state residents. The New Jersey chapter of Americans for Prosperity, a conservative anti-tax group, organized a phone bank effort Tuesday to rally opposition to the deal.

"There is nothing fair about a deal that includes a 150 percent increase in fuel costs regardless of what else is included in the package," said Laurie Ehlbeck, state director of the conservative National Federation of Independent Business.

Under Christie's plan, the state would spend $2 billion annually for eight years on the Transportation Trust Fund, with $1.2 billion coming from the gas tax and $800 million from borrowing. Depending on how the final bill is worded, the gas tax increase may go beyond 23 cents in future years. If lawmakers pass a bill with a formula that calls for $1.2 billion in new gas tax revenue every year, the tax hike may go beyond 23 cents to hit the revenue target each year.

Work was halted

Christie and lawmakers struggled for years to reach agreement on how to replenish the trust fund, which exhausted its borrowing authority in July and ran out of money in the summer. Lacking a legislative fix, Christie ordered a shutdown of dozens of transportation projects during the summer, a move that put thousands of road contractors out of work during their busiest season.

Bobby Briant, chief executive of the Utility and Transportation Contractors Association, which represents many of the workers who were affected by the shutdown, praised the deal.

"This is the kind of long-term thinking that New Jersey has desperately needed on transportation infrastructure," Briant said. "Raising the gas tax will provide the billions in revenue our state needs to fix our broken roads and bridges and pay down our debt, while also steering clear of past borrowing practices that are now haunting us."

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