PoliticoNew Jersey- Gov. Chris Christie on Friday signed New Jersey’s first gas tax increase in nearly three decades, delivering a $16 billion infrastructure spending plan and ending nearly four months of economic tumult.
The Republican governor, who has never before approved a tax increase, simultaneously lifted an order that has frozen spending on transportation since early July. Thousands of construction workers are unemployed and billions of dollars in major road, rail and bridge projects have fallen months behind schedule.
In a statement, Christie said he had achieved his goal of providing “tax fairness” to the state’s residents, combining the new infrastructure spending with a series of large tax cuts that will cost the state about $9 billion in revenue over the next eight fiscal years.
“Through this legislation, we are continuing our commitment to providing tax relief for working New Jerseyans of all income levels, senior citizens, military veterans and property owners, while ensuring solid, reliable, state-of-the-art roads, bridges and mass transit systems,” Christie said. “Over the next eight years, a record $32 billion in state and federal funds will be invested in infrastructure improvements and modernizations in New Jersey.”
The governor and state lawmakers, who passed the two bills (A10 and A12) a week ago Friday, agreed to increase the state’s tax on gasoline 23 cents to 37.5 cents per gallon. The state currently has the second-lowest gas tax in the nation, after oil-rich Alaska. The increase should kick in next month, thought it may be felt at the pump before then.
The hike, combined with new charges on diesel fuel, will raise an additional $1.2 billion in revenue over the current gas tax. It will allow the state to replenish its Transportation Trust Fund, which became insolvent in July after years of mismanagement under numerous governors. The new revenue will be combined with additional borrowing to provide $2 billion in state transportation spending each year for the next eight years.
“This is one of the most significant investments in New Jersey’s infrastructure and economy in recent history,” state Sen. Paul Sarlo, a Democrat who sponsored the legislation with Republican Sen. Steve Oroho, said in a statement. “We can now put people back to work on stalled transportation projects and launch the renewed Transportation Trust Fund with the sustained investments needed to repair and improve the state’s infrastructure and to support economic growth.”
But many were angry Friday, with both Republicans and Democrats taking issue with the legislation. Some conservatives have been railing against the idea of any gas tax increase for months, saying it will hurt families and possibly the state’s economy.
Sen. Kip Bateman of Somerset County said he was immediately launching a repeal effort and plans to introduce legislation to roll back the tax and find “fiscally responsible alternatives.”
And Sen. Jen Beck, who has organized anti-gas-tax rallies in her Monmouth County district, took on the leader of her own party, saying she was “disappointed” that the governor approved the final legislation.
“I have no doubt that his office, just like my office and those of most legislators, was bombarded with calls from the many people of this state who oppose this billion dollar tax increase,” she said in a statement. “Defying the will of so many people on such an important affordability issue will not help us to change the perception shared by too many residents that they are being taxed out of New Jersey.”
Some Democrats and liberals objected to the tax cuts included in the legislation. Under the new laws, the seven percent state sales tax will be reduced by 3/8 of a point, providing a small amount of relief for consumers — just $37.50 per $10,000 in taxable goods — while costing the state more than $600 million in annual revenue.
The estate tax, which has a threshold of $675,000, will now have its limit increased to $2 million in January. By January 2018, the estate tax will be eliminated entirely. That will also cost the state upwards of $600 million in annual revenue.
The legislation will also increase the Earned Income Tax Credit, which benefits low-income workers, from 30 percent of the federal level to 35 percent. The amount of retirement income eligible for tax exclusion will be increased to as high as 100,000. Veterans will also be able to claim a personal income tax exemption.
Liberals had raised concerns the loss of revenue from the tax cuts would force the state to cut important social programs, skip further payments into the state’s troubled public employee pension system or even reduce aid to school districts.
Senate Democrats had fought the governor all summer over his insistence that the legislation include a sales tax cut, saying it was far too costly. They had been seeking a tax-cut package that would have cost the state less than $900 million in annual revenue once fully phased in, but said they had no choice to end their stalemate by compromising.
Tom Byrne, the chairman of the State Investment Council and a potential Democratic candidate for governor, said Friday that Christie's successor as governor may need to repeal the sales tax cut. "I think it’s patently ridiculous and frankly a ploy to make the next governor look bad early on," he said.
There have been warnings since early last decade about a coming infrastructure funding crisis, but there had never been enough political capital or political willpower in Trenton to touch the gas tax or find another revenue stream. All the while, the state continued to over leverage debt on the TTF program, selling long-term bonds and using the proceeds to pay for short-term resources until the state’s coffers finally ran dry this year.
The new law authorizes the trust fund for another eight years.
“This will allow the state to make much needed improvements and repairs, while also paying down debt. At the same time, it will create thousands of jobs and kick start the state’s economy. This is the kind of solution New Jersey needed,” said Tom Bracken, who leads the state Chamber of Commerce and chaired the Forward New Jersey coalition, which has been pushing for the legislation. “Today represents a historic moment in our state’s history.”