For the first time in 316 months, or more than 26 years, New Jersey’s gas tax is going up.

The next change could come in just two months.

New Jersey’s gas tax is climbing from 14.5 cents per gallon, the second-lowest in the nation, to 37.1 cents per gallon, the seventh-highest. It had been estimated the hike signed into law Oct. 14 by Gov. Chris Christie would be 23 cents a gallon, but the math is more complicated than straightforward.

New Jersey levies both a retail-level tax of 10.5 cents a gallon and a wholesale-level tax of 4 cents a gallon.

(The retail tax was last raised in 1988. The wholesale tax was created in 1990 and converted to 4 cents a gallon in 1991. So when people say New Jersey's gas tax hasn’t gone up since 1988, that’s not exactly the case.)

The hike taking effect Tuesday is levied at the wholesale level, rather than the retail one. Each refinery and wholesale distributor is responsible for collecting the tax from the gas station when fuel is delivered – which makes collecting easier for the state and minimizes the chance that taxes aren’t paid.

The new law sets the petroleum products gross receipts tax, as it’s called, at 12.85 percent. That rate was applied to the average retail price for gasoline in New Jersey, after subtracting existing federal and state taxes, and the math works out to an increase of 22.6 cents.

“The 22.6 cents-per-gallon tax increase is based on a tax rate of 12.85 percent on retail gasoline,” said Treasury Department spokesman Willem Wijksen. “It is adjusted at the beginning of each quarter in response to the change in the average price per gallon as determined from a random survey administered by the Board of Public Utilities.”

Those quarterly adjustments are to take effect each quarter, at the start of January, April, July and October. Whether they’re done or not remains to be seen; they were supposed to be done twice a year under a 1991 law, but that doesn’t appear to have been done. Also, any price-driven increases could be offset by an annual adjustment each fall that ensures the tax yields steady revenues for the state -- no losses, but also no gains.

That level of detail wasn’t discussed as lawmakers debated and approved the bill a few weeks ago, despite intense public opposition.

Sen. Paul Sarlo, D-Bergen, acknowledged that many are upset. “Even for those who are supporting the measure, any time you need to raise a surcharge or a fee or a tax, it is a very difficult vote,” he said.

“Our state is ranked at the bottom when it comes to investment in our roads, our bridges, our utilities. We are at the bottom,” Sarlo said. “For a state that has so much promise and so much wealth, to be ranked at the bottom by every nonpartisan study of consulting engineers across the country is not a good position to be in.”

From the latest AAA survey, a comparison of New Jersey average prices to national ones, as of Oct. 31, 2016. (Screenshot from gasprices.AAA.com)

The impact on drivers depends on what kind of car they drive and how many miles they travel.

A person who drives 15,000 miles a year in a car that gets 20 miles per gallon would pay about $170 more a year in gas taxes.

“We are ridiculously overtaxed now, and this will add an enormous burden,” said Sen. Diane Allen, R-Burlington. “This is a huge tax increase.”

Sen. Shirley Turner, D-Mercer, said the increase will lead to higher prices for products and services, as well, particularly at grocery stores.

“A 23-cent increase in gasoline tax is unforgivable, is just unconscionable,” Turner said.

Some lawmakers have proposed bills repealing the gas tax increase, though the chances would seem slim, given that legislative leaders championed the Transportation Trust Fund initiative.

Senate President Stephen Sweeney, D-Gloucester, doesn’t anticipate a drop in sales to out-of-state drivers, despite the tax hike.

“It’s cheapest in the region still. We’re cheaper than Pennsylvania. We’re cheaper than New York. And we’re cheaper than Connecticut. Delaware is lower. Delaware is obviously lower,” Sweeney said. “But we are very much in an area where we’re the cheapest in the region. The turnpike is the busiest highway in the country. Those sales aren’t going to go down, because wherever they go, it’s going to be higher.”

As of yesterday, New Jersey’s average price for a gallon of regular unleaded was recorded by AAA as $2.037 – 36 cents less than in Pennsylvania, 34.3 cents less than in New York and 29.5 cents less than in Connecticut.

Average gas prices in New Jersey as of Oct. 31, 2016, according to AAA. (Screenshot from gasprices.AAA.com)

Smaller advantages would remain even if prices rise 23 cents a gallon to around $2.27.

New Jersey’s average was only 4.1 cents cheaper than in Delaware – so northbound interstate commuters will have a bit of an incentive to fill up at the current price of $2.16 at the Sunoco station at the Delaware House Travel Plaza on I-95 in Newark, 5 miles from the Delaware Memorial Bridge.

If sales drop, that could add to the gas tax a year from now. The tax-hike law guarantees the state a steady level if revenue – so if sales of gasoline drop, the tax will be raised to account for that. Similarly if sales go up, the tax would go down, though improved fuel efficiency of cars means gas sales are down.

The gas tax is projected to raise $1.1596 billion a year, though the first fiscal year is less – at around $694 million – because the state’s fiscal year is already one-third over.

It’s also projected to raise around $31 million from non-motor fuels, prorated for the first year; this excludes home heating oil, which is tax exempt. Also, it’s projected to raise almost $40 million in added taxes on diesel fuel, though that increase doesn’t begin to go into effect until January.

Sweeney said the state would be at an economic disadvantage if it didn’t increase its infrastructure investment. Sen. Kevin O’Toole, R-Essex, said more than 600 of the state’s bridges have been deemed structurally deficient, with 1,700 more ranked as functionally obsolete.

“All of us hate paying more, including myself. And my family. And my constituents,” said Sen. Joseph Kyrillos, R-Monmouth. “But lost in the rhetoric of gas tax politics is a package of significant tax savings for New Jersey seniors, for businesses, for families. I understand many people are upset with paying more for gas, but we’re not getting an understanding of the whole story.”

None of the tax cuts that accompany the gas-tax hike are yet in effect. In January, the sales tax begins to decline, by 0.125 percent, and more estates are exempt from the estate tax. The working poor can begin receiving larger earned income tax credits when they file tax returns early next year.

Lowest Gas Prices in New Jersey
New Jersey Gas Prices provided by GasBuddy.com

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