Senate Democrats detail plan for gas tax hike, tax cuts elsewhere

PoliticoNewJersey- Senate budget chairman Paul Sarlo on Tuesday began pushing a package of three tax cuts as a potential compromise to renew the state’s Transportation Trust Fund, which will run out of money this summer.

Sarlo, speaking during a hearing to review Gov. Chris Christie’s proposed budget, said Democrats want a $2 billion plan that would ensure stable funding for seven to 10 years. He said Democrats could possibly support an agreement to balance an increase in the state’s 14.5-cent gas tax with three forms of tax cuts: an elimination of the estate tax, an exemption for charitable contributions and a break on retirement income.

“There are going to be those who criticize us on the tax fairness issues,” Sarlo said during the hearing, focused on transportation components in the governor’s proposed budget. “But I believe the tax fairness issues help justify a gas hike — a gas tax increase — for the folks, for the residents of New Jersey.”

Acting state Transportation Commissioner Richard Hammer would not comment on the specifics of the plan, repeating the governor’s demand that lawmakers come up with a TTF plan on their own.

“The Legislature is going to come up with a plan,” Hammer told Sarlo. “If you have a plan in place, the governor is anxiously receiving that plan.”

Pressed, he added, “having a consistent revenue stream and understanding what that is would certainly be positive.”

The remarks come a day after Assembly Speaker Vincent Prieto said he could also support phasing out the estate tax and implementing an exemption for charitable contributions if it were part of a broader deal on the trust fund. Prieto said he would not post a bill (S1728) sponsored by Sarlo and Republican Sen. Steven Oroho that would phase out the estate tax over five years unless it were part of that larger compromise.

Sarlo said he was on the same page.

“Although I personally believe in this, I understand from a public policy perspective it would be very difficult to pass this Legislature,” Sarlo said during the hearing Tuesday. “I agree with the speaker: A phase-out of the estate tax must be done in conjunction with an injunction with a Transportation Trust Fund renewal. So I think we’re making some progress there.”

Asked later Tuesday about Sarlo's proposal, Prieto said in a statement, “that is the framework that has already been discussed for a year now."

"I look forward to more discussions," he added.

Sarlo told reporters before the hearing that he’d also be open to raising the exemption on the estate tax from the current level of $675,000 to something higher, potentially to the federal rate of $5.45 million.

Another bipartisan bill, sponsored by Sarlo and Oroho, would raise the tax exemption on retirement incomes (S998). Under the bill (S998), the exclusion rate for married couples filing separately would rise from $10,000 to $50,000; it would rise from $15,000 to $75,000 for single taxpayers; and it would rise from $20,000 to $100,000 to married couples filing jointly.

The increase would happen over three years. Those higher exemptions would cover pension income and other retirements savings plans. Both bills advanced out of committee in February but haven’t been taken up by the full Legislature.

Several Republican senators, including Minority Leader Tom Kean Jr., are already sponsoring a bill (S1932) that would create an exemption on charitable contributions. Sarlo said they would need to compromise — perhaps limiting the total amount of the deductions — but that he found the concept appealing.

“If we could do some type of cap on deductions, especially for those middle-class residents who like to donate locally to their local church, their local, their local synagogue, to the local fire department, provide them the ability to do that tax-free and get a deduction from the state of New Jersey,” he said.

Sarlo also said a $2 billion trust fund would need to dedicate more money for local infrastructure projects. About $284 million is included in the current $1.6 billion annual program, Hammer said. Sarlo thinks something closer to $400 million to $500 million would be warranted.

Sen. Jennifer Beck, a Republican, is pushing her own plan to fund the trust fund without a gas tax increase. The governor has said he’s found some merit in it and has discussed it with her.

It would involve squeezing a penny here and a penny there until there’s enough money for a $1.6 billion annual contribution to the trust fund and enough cash to support regular, on-track payments to the state’s pension system, reaching the full amount by 2023.

Democrats have dismissed the idea as “pie-in-the-sky” policymaking. 

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