Gas tax hike coming? Treasurer says no, sales trend says yes
Gasoline consumption continues to decline in New Jersey, raising the possibility of another gas-tax increase this fall. The Murphy administration, at least for now, thinks one can be avoided.
The law that hiked the gas tax in 2016 requires it to be adjusted further to guarantee revenue collections meet a specified target. Though sales are down, the proposed budget assumes revenues will grow modestly – up $32 million, nearly 2.2 percent – and no tax hike will be needed.
“While consumption is likely to decline somewhat further, with the 4.3 cent rate increase in effect for an entire 12 month cycle, we are cautiously optimistic that total revenues will remain stable,” said state Treasurer Elizabeth Maher Muoio.
The tax rate was raised 22.6 cents a gallon in 2016. It wasn’t increased in 2017, though the Murphy administration last year said it should have been if historical consumption trends were followed. Last October, it was raised 4.3 cents a gallon.
A decision will be made in August, as required by state law, Muoio said.
“At this point, our budget does not assume raising the gas tax, but again with the caveat that we’ll have to look at consumption and going through the next few months,” she said.
Analysts with the Legislature’s nonpartisan budget office disagree. They project that gas-tax revenues will fall short of their targets this year and that a tax hike may be needed to add around $100 million to next year’s collection target.
“The OLS forecast assumes that the statutory target will be met for fiscal year 2020, which might necessitate a further increase in the tax rate if consumption does not substantially increase between now and the fall,” said David Drescher, chief of the Office of Legislative Services’ finance section.
New Jersey’s gas tax is made up of two components – a 10.5 cents a gallon motor fuels tax levied at the retail level and a 26.9 cents a gallon “petroleum products gross receipts tax” levied at the wholesale said.
The wholesale tax is the portion that can vary each year, while the retail tax doesn’t change. The collections from the motor fuels tax are projected to decline 2 percent next year.