PoliticoNew Jersey- With sponsors calling it a “very, very, very difficult” vote, but a needed one, the State Legislature on Friday passed a controversial $16 billion infrastructure plan that will raise taxes on gasoline for the first time since 1988 while cutting hundreds of millions of dollars in other taxes.
The legislation, which pairs a series of sweeping tax cuts with a 23-cent-per-gallon gas tax hike, now heads to Gov. Chris Christie's desk. The Republican governor has agreed to sign the legislation.
The proposal, which also looks to cut the state sales tax a fraction of a penny and eliminate a major tax on inherited wealth, represents one of the biggest policy changes Trenton has tackled in decades.
One veteran lawmaker called it “the most significant bill we have ever seen in 40 years.”
The first bill (A12), which includes both the tax cuts and the tax increase, passed the Senate by a vote of 24-14 and the Assembly by 44-27. A second bill (A10) authorizing the Transportation Trust Fund to spend $2 billion a year on infrastructure passed the Senate, 23-14, and the Assembly, 45-27. Five Senate Republicans voted in favor, as did seven members of the Assembly GOP.
The Legislature’s action and the governor’s ultimate signature will officially end a months-long stalemate that has left thousands of construction workers on unemployment and billions of dollars in projects shut down.
Democratic leaders and the governor had been unable to agree on the right mix of tax cuts even as the state ran out of money to spend on transportation work.
Christie froze spending in July and the trust fund became insolvent in August, the culmination of years of over borrowing.
“Members of both sides of the aisle, including governors, have kicked the can down the road and borrowed and borrowed on the backs of future generations,” Sen. Paul Sarlo, a Democrat and sponsor of the legislation, said on the Senate floor before the vote. “Well, today, we’re going to stop that borrowing.”
The legislation authorizes the Transportation Trust Fund to spend $2 billion per year over the next eight years on road, rail and bridge projects throughout the state. Much of it, despite Sarlo’s comments, will come from new debt service. But the additional gas tax revenue — more than $1.2 billion per year — should allow the state to pay down the existing trust fund debt and spend less money from its general fund on bond payments.
Republican lawmakers, as well as Democrats in competitive districts, have been facing enormous pressure from conservative groups who wanted them to vote against the legislation. Constituents have flooded the phone lines of some legislative offices with demands that they kill the gas tax hike. Radio hosts have spent weeks railing against the plan.
Some members of the GOP said there was no way they could vote for the bills; such a large increase in the gas tax could cost some families hundreds of dollars per year, they said, and may ruin the state’s economy.
Assembly Speaker Vincent Prieto discredited the idea the deal would blow a major hole in the budget, saying the legislation will instead "jolt our economy."
"This is the right thing to do for the state of New Jersey," he said. "I know people don't want to pay more at the pump but this is a public safety issue."
New Jersey’s gas tax is currently 14.5 cents per gallon — the second-lowest in the nation — and would increase to 37.5 cents under the legislation. The tax increase would likely kick in next month, though it could be reflected at the pump before then.
“I stand today on behalf of New Jersey’s residents in opposition to one of the largest tax increases in New Jersey history,” said Sen. Jennifer Beck, a Monmouth County Republican who noted she had received 25,000 signatures on a petition opposing the legislation.
“I stand to oppose this tax increase for the working class, middle class and those living in poverty that make 15,000, 40,000, 45,000 dollars a year that do not qualify for the Earned Income Tax Credit,” Beck said on the Senate floor. “I stand in opposition on behalf of the seven million licensed drivers in the state, half a million of which drive vehicles from the 1980s; 2.5 million of which drive vehicles that are 15 to 20 years old. They are not efficient vehicles.”
But a few Republicans were strong supporters, including Assemblyman minority leader Jon Bramnick. He said he wasn’t happy with the final product, but that it was the best piece of legislation everyone could agree to.
“I would want many more tax cuts,” Bramnick said on the Assembly floor before the vote. “I would want a lower tax on gas. But none of us as individuals control this chamber or control the state of New Jersey. We came to a compromise and that’s what I believe good government is.”
Sen. Kevin O’Toole, a close ally of the governor who is not seeking another term, also voted in favor of the legislation and appeared to be a key supporter. He gave a fiery speech on the floor.
“How do you support it? I say how do you not,” he said. “If we don’t do this — if we don’t thread this needle today — what do we do? Wait another decade? Wait another 20 years? Irresponsible. Stand for something. Stand for something.”
To win the support of Christie and those Republicans, the legislation includes numerous tax cuts that would eliminate about $1.3 billion in general fund revenue by fiscal 2020, according to the nonpartisan Office of Legislative Services. Over eight years, the entire plan could cost the state as much as $9.1 billion in revenue, OLS estimates.
Under the legislation, the 7 percent state sales tax would be reduced by 3/8 of a point — down from a full point reduction that Christie and Prieto had agreed to in June. For consumers who spend $10,000 a year on taxable goods, the change would save them just $37.50.
The estate tax, which has a threshold of $675,000, would see that limit increased to $2 million in January under the bills. By January 2018, the estate tax would be eliminated entirely.
Each of those cuts would cost the state upwards of $600 million per year in revenue. The legislation would also increase the Earned Income Tax Credit, which benefits low-income workers, from 30 percent of the federal level to 35 percent.
And the amount of retirement income eligible for tax exclusion would increase from the $15,000 to $75,000 for a single taxpayer, from $20,000 to $100,000 for married couples filing jointly, and from $10,000 to $50,000 for married couples filing separately.
Veterans would also be able to claim a personal income tax exemption.
Some Democrats called the tax cuts “a recipe for disaster,” saying elimination of the estate tax would benefit the state’s wealthiest residents while leading to draconian cuts to social programs, school funding and payments to the public employee pension system. The sales tax cut, they said, does next to nothing to help the poor and working class.
“We are going to rue the day when the chickens come home to roost," Sen. Shirley Turner said. "We cannot pay our bills now. We cannot fund education, we cannot make our payments into the pension fund that we have committed ourselves to for our employees. But at the same time, we’re giving all of these taxes cuts to people that do not need them.”
Republicans also were critical of the tax cuts legislation, saying it would do little to achieve the “tax fairness” that Christie had been demanding in exchange for increasing the gas tax.
Assemblywoman Amy Handlin called the sales tax cut “a mirage” and said it was part of a “shell game,” providing no real savings to consumers. “Promising people unfair fairness is a little bit like gas: It’s really slick, but when you get close to it, it smells,” she said.
In the Senate, lawmakers from both sides of the aisle also raised concerns about a more obscure component of the legislation that would create a four-person committee to review transportation projects.
The Annual Transportation Capital Program Approval Committee would include three public members from different regions of the state, as well as the commissioner of the Department of Transportation. The legislation says the committee would “ensure that Legislative input is provided in the process of selecting the transportation capital projects.”
While Sarlo said it would merely provide another layer of oversight, some feared it would become a tool for the governor and legislative leaders to make political decision about transportation spending.
Sen. Nia Gill, a Democrat, said it was unconstitutional and would take power away from the Legislature. Sen. Raymond Lesniak, another Democrat, said it would give the governor and legislative leaders “the power to decide what projects gets funded in your district.”
“This bill is the most dangerous bill that has ever been presented to the Senate certainly in the 39 years I’ve been here. The most dangerous bill ever presented to the senate,” Lesniak said. “This will make the shenanigans at the Port Authority look like a walk in the park.”
Even though Sarlo dismissed the concerns, he left even some high-ranking allies unhappy with the change. Senate Majority Leader Loretta Weinberg, a fellow Bergen County Democrat, said she abstained from the vote on the TTF bill because of that component.
"I was not happy with the four member committee," she said. "I think there was a misunderstanding here, I think they actually do have veto power. I think it's very inappropriate."