New Jersey Democrats Propose Hiking Gas Tax in Tradeoff for Estate Tax Reduction
The Garden State's 14.5-cent gas tax (10.5 cent excise tax plus 4.0 cpg Petroleum Products Gross Receipts Tax) is the second lowest in the United States (after Alaska's), having not been raised since 1988, notwithstanding recent attempts to do so.
State Assembly Speaker Vincent Prieto (D-Hudson) crafted the latest 'tax tradeoff' strategy in response to proposals by Gov. Chris Christie that would eliminate the estate tax and raise the retirement income exemption. Christie has previously stated he would only support legislation to raise the gas tax if it was accompanied by tax reductions elsewhere. The tax issue has also prompted a debate about what is considered "tax fairness."
"Prieto said at a Statehouse news conference that he would 'be open' to phasing out or raising the exemption on the estate tax, but only as part of a deal on funding the Transportation Trust Fund, which runs out of money this summer and is largely funded by the gas tax," writes Samantha Marcus of NJ Advance Media for NJ.com.
The solution seems clear: If we can't borrow any more money, we need to increase revenue. Currently, the only solution that can raise enough money to fund the TTF, fix our roads, and begin chipping away at our debt burden is one that includes an increase to the gas tax.
The two tax reduction measures "would deliver about $400 million in tax cuts to New Jersey residents, according to the Senate Majority Office," wrote Marcus on Feb. 29. But apparently that won't satisfy Christie.
"Christie has said any gas tax increase must be part of what he called 'tax fairness'," writes Marcus on April 18. "But the Senate's estate tax phase out, he said, isn't enough."
Putting aside the need for transportation funding, the tax cuts to the general fund have aroused the concerns of other stakeholders.
Leaders of the Anti-Poverty Network, Main Street Alliance, New Jersey Policy Perspective, Clean Water Action, the Sierra Club, the New Jersey Education Association and New Jersey Working Families said New Jersey cannot afford to forgo the hundreds of millions of dollars in revenue the estate tax brings in each year. [More here].
Requiring a reduction in General Fund taxes to allow for a hike in gas taxes amounts to an indirect subsidy to the Transportation Trust Fund. Should fixing New Jersey's roads be done at the expense of meeting other needs of the state that don't have trust funds, particularly when they are funded by a progressive tax on inherited wealth?
Prieto's idea of tax fairness differs from Christie's.
"If you want to talk about real tax fairness, then you must talk about actions such as increasing tax credits for working families, not providing tax breaks to the wealthy," states his press release on April 18.
Hat tip to The AASHTO Daily Transportation Update.