TRENTON, NJ – New Jersey’s gasoline tax is scheduled to increase 9.3 cents per gallon effective Oct. 1 to ensure compliance with the 2016 law that requires a steady stream of revenue to support the state’s Transportation Trust Fund (TTF) program.
This is one tax hike that cannot be blamed on Gov. Phil Murphy. His predecessor, former Gov. Chris Christie, signed off on the mechanism and formula used to calculate the tax each year. The economic downturn caused by the COVID-19 pandemic also had an impact.
“As we’ve noted before, any changes in the gas tax rate are dictated by several factors that are beyond the control of the administration,” said state Treasurer Elizabeth Maher Muoio.
“The law enacted in 2016 contains a specific formula to ensure that revenue is meeting a certain target. When it does not, the gas tax rate has to be adjusted accordingly in order for us to meet our obligation under the law and fully fund the state’s many pressing transportation infrastructure needs, » she explained. « Highway fuels consumption took a significant hit in FY 2020 because of the economic downturn caused by the COVID-19 pandemic.”
The state’s TTF, funded by gasoline tax revenue, is used to pay for rail, bridge and roadway infrastructure improvements and new construction.
The increase will push the state gasoline tax to 50.7 cents per gallon; tax on diesel fuel will increase to 57.7 cents per gallon. Since the funding law was enacted, New Jersey’s gasoline tax has increased over 36 cents per gallon.
After state legislators approved the plan signed by Christie, the state’s gasoline tax, which had been one of the lowest in the United States, jumped from 14.5 cents to 37.1 cents.per gallon.
Consumption of gasoline declined by a total of 38.7 percent from March to May, according to Muoio, while diesel fuel consumption declined by 16.5 percent. Consumption of gasoline and diesel fuel continues to be depressed as many people continue to work from home and limit extracurricular activity.
Under the 2016 law signed by Christie, New Jersey’s TTF program is required to provide $16 billion over eight years to support critical infrastructure improvements to the state’s roadways and bridges. In order to ensure the state has the funds necessary to support these projects, the law dictates that the Petroleum Products Gross Receipt (PPGR) tax rate must be adjusted accordingly to generate roughly $2 billion per year.
A statutory formula determines how much the PPGR tax rate is to be adjusted annually in order to meet the Highway Fuels Revenue Target.
The HFRT is required to be reviewed annually each August by the Treasurer, in consultation with the Legislative Budget and Finance Officer (LBFO). This process just concluded, with Muoio and LBFO Frank Haines consulting on revenue numbers.
The tax rate is to be adjusted at the start of each year based on the prior fiscal year’s shortfall or surplus. If last year’s revenue was below target, then the cap must rise to make up the shortfall or be lowered to account for the surplus.
The PPGR tax rate is then re-calculated to meet the current year’s updated Highway Fuels Revenue Target. The Highway fuels revenue collections in FY 2020 are projected to fall short of the FY 2020 Highway Fuels Revenue Target by $154 million.
Also looming ahead in mid-September for New Jersey motorists are toll hikes on the New Jersey Turnpike, Garden State Parkway and Atlantic City Expressway – approved by Gov. Phil Murphy.
Murphy also proposed a series of tax increases in his 2020-21 $32.4B state budget introduced earlier this week, including higher taxes for millionaires and higher-earning businesses, cigarettes, boat sales and guns and ammunition.
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