Governor Chris Christie and state lawmakers signed on the approval to hike the gas tax by 23 cents per gallon in exchange for cutting New Jersey’s sales tax from 7% to 6.875% in 2017 and to 6.625% in 2018 in order to pay for at least eight years of transportation construction projects.
This compromise also eliminates the estate tax, eases taxes on retirement income, boosts the earned income tax credit for the working people, and creates a tax deduction for veterans. Being the first gas tax hike since 1988, this package deal came into effect on November 1st.
As a result of its passing, many people are wondering, is this a good or bad deal for average taxpayer? There is only a complicated answer to this question.
A Former Democratic state Senator, Gordon Maclnnes said, “It’ll be invisible to most families. It’s going to work with little paper cuts in terms of the benefits, if you will, that very few people will notice unless they’re buying a car.” He also said, “Sales tax for most of us typically is in pennies here and a dime there, it’s in most cases a small part of your expenditure.” The new gas prices are still cheaper than New York, Pennsylvania, and Connecticut’s prices.
The revenue from the existing gas tax is used to pay for past transportation projects. The Transportation Trust Fund currently has about $16 billion in debt, and they do not have permission to borrow any more money.
This impact of higher gas tax honestly depends on how many miles a person drives and that person’s car’s fuel economy. Let’s say you drive 15,000 miles a year, in a vehicle that averages 25 miles per gallon, you would buy 600 gallons of gas in a year.
Assuming you purchase that gas in New Jersey, the hike of 23 cents per gallon would put you $140 more in raised gas taxes for a total of $225 including the existing 14.5 cents gas tax.
AAA has estimated that an additional 23 cents per gallon will cost the average driver about $170 more a year. On the other hand, in exchange for this gas tax, you could save about $135 a year on lower sales tax.
Is sales tax fair? Assemblyman, Michael Patrick Carroll, said “It’s a mistake to cut the sale tax because nobody moves out of New Jersey because of it. When people leave this state, it’s because of high-income taxes or high property taxes. They don’t leave because they’re paying an extra penny on the sales tax.” He also said, the sales tax “a very fair tax.”
In my opinion, raising a gas tax by 23 cents per gallon and lowering sales tax by a certain amount of percentage will not be a good combination. People who have a long commute every day will be spending extra money on gas compared to some savings on sales tax with groceries, clothing, most medicines, etc.
A small gas tax raise might be sufficient to fund transportation projects. New Jersey does not need to approve a deal that will leave it in a worse financial state. Therefore, in my opinion, we must stop the gas tax now!