Huge increase: Gas taxes would more than triple, if prices go up
A modified version of the proposal to renew the state’s Transportation Trust Fund was introduced Monday in the Senate and could be voted on later this week.
The basics are the same: A gas tax hike estimated at 23 cents a gallon, plus higher taxes on jet fuel. Spending on roads, bridges and rail of $2 billion a year for 10 years. A series of tax cuts aimed at achieving the so-called “tax fairness” that Gov. Chris Christie has called for, including the elimination of the estate tax.
There are some key changes, however — including the potential for a much higher gas tax if fuel prices climb:
- The gas tax would be increased by creating a new 12.5 percent tax at the wholesale level, applied on petroleum products at the refinery. That would presumably be passed to consumers. The original plan raised the tax 10 cents a gallon and applied a 7 percent tax. So, as prices climb, the tax would be higher with a 12.5 percent rate.
- The 12.5 percent tax would be capped. It would only apply to the first $3 of the wholesale price of a gallon of gasoline. The tax hike therefore could be as high as 37.5 cents a gallon if prices go up that high, for a total of 52 cents per gallon.
- A proposal to levy a $150 annual fee on owners of electric- or hydrogen-fueled cars is no longer part of the proposal, at least not immediately. Instead a policy committee would study that issue and make a recommendation by April on whether to adopt such a ‘vehicular mileage tax.’
- The proposal to exempt more pension and retirement income from New Jersey income taxes was expanded. It would still increase fivefold to $100,000 for couples, but over five years instead of four. Additionally starting in the fifth year, seniors earning up to $125,000 could take a 50 percent credit and those earning up to $150,000 could take a 25 percent credit.
- The plan no longer includes a new income tax deduction for gas taxes paid, which would have been available for people whose gas taxes exceed 1 percent of their income.
- A “poison pill” links the tax cuts to the TTF funding plan; this is intended to provide a guarantee the plan’s tax cuts will take effect, after critics such as Christie raised concerns that a future governor could delay or cancel the phase-out of the estate tax after his term ends in January 2018.
The plan still includes other elements from the version first unveiled June 10, such as a tax deduction for charitable contributions and an increase in the earned income tax credit paid to the working poor.
The proposal could be added to the agenda of the Senate Budget and Appropriations Committee for its meeting Thursday.
Lawmakers are hoping to enact a new TTF funding plan by June 30, when the fund's current authorization to borrow money expires with the end of the 2016 fiscal year. The fund has enough money on hand to pay bills through early August though couldn't authorize any new roadwork.
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