Hike in gas tax looks likely this fall, as tax collections drop
An increase in New Jersey’s gas tax this fall looks increasingly likely, as collections have fallen behind expectations.
“I’m going to say about 3 cents, maybe. It’s a really rough, off the top of my head estimate,” Frank Haines, the Office of Legislative Services budget and finance officer, said Monday at an Assembly Budget Committee hearing.
When the nearly 23 cent per gallon increase was approved in 2016, it was done so through a formula that guarantees the state a predictable level of revenue -- $1.16 billion, on top of the existing gas tax collections that already existed at the time.
If collections go down, should demand for gas drop, the tax rate goes up. Those collections are now declining, with the official state Department of the Treasury forecast trimmed by $82 million Monday. That comes on top of reductions that had been forecast in March.
In all, the Treasury Department estimate for the petroleum products has been reduced by $126 million from the $1.487 billion predicted in the budget adopted last summer. The OLS estimate is $146 million lower than the number certified a year ago.
Each penny on the gas tax yields $40 million to $50 million in tax revenue, Haines said.
“Off the top of my head, you could be looking at 2 to 4 cents, or something like that,” Haines said.
State Treasurer Elizabeth Maher Muoio said that in accordance with state law, she will meet with Haines in August to review the tax collections and calculate whether a change in the tax rate is needed.
“We’ve seen that the revenue number on the gas tax has been lower. We’re going to continue to monitor it throughout the summer. We’re going into the heavy travel season, so we’re going to watch what happens,” Muoio said.
Muoio said higher gas prices won’t necessarily mean less gas consumption, so she cannot predict what will happen with the gas tax. Any change would take effect Oct. 1.
“It will depend on what the revenues are looking like in August. And we’ll sit down, and we’ll make sure the bills are paid,” Muoio said.
Separately from whatever happens with the gas tax, Gov. Phil Murphy is seeking approximately $1.5 billion in tax hikes for the 2019 state budget.
Those include an increase in the sales tax, higher taxes on income over $1 million and some corporate tax changes, as well as a new taxes on prepaid cell phones and firearms. Democrats who control the Legislature seem reluctant to adopt those plans.