Will New Jersey Hike Gas Taxes to Fund Transpiration?

Taxes that have little to do with road and bridge work are at the center of a debate in New Jersey over paying for transportation debt and projects. The conversation has revolved around how to pay for the transportation trust fund, which runs out of borrowing authority on July 1, with a group of lawmakers proposing a 23-cent wholesale fuel tax hike. The idea is so unpopular in opinion polls and therefore unsavory to lawmakers that the tax hike has been packaged with a slew of other tax cuts, including slashing the estate tax and cutting retirement income taxes. That’s compromise, say some legislators who back the deal. But what is fair for one person is an outrage for another when it comes to funding transportation in New Jersey. “I think the reason they’re mixing the two is to give people cover,” said Republican state Sen. Michael Doherty, who opposes the deal because of the gas tax hike. “This is one confusing shell game.” So far the deal doesn’t have the support of Republican Gov. Chris Christie, the loudest voice for what he calls “tax fairness.” THE PLAN Lawmakers on Monday formally introduced legislation to replenish the state’s current $1.6 billion transportation trust fund with a $2 billion-per-year plan that goes until 2027. The plan is financed in part by raising the state’s 14.5-cent fuel tax to 37.5 cents. The proposal would also phase out the estate tax, cut retirement income taxes, raise the Earned Income Tax Credit and increase credits for pensioners in New Jersey. Lawmakers are also calling for establishing a tax deduction for charitable contributions. WHAT’S FAIR? The coalition supporting the 10-year, $20 billion transportation proposal includes leadership in the Democrat-led Senate and Assembly as well as some Republicans, who say the idea is a good deal for residents because other taxes will come down as the fuel tax goes up. But the proposal is taking flak from many sides. Liberal groups, Democratic lawmakers and labor unions held a news conference recently to denounce the estate tax proposal in particular as a giveaway to wealthy residents. “It absolutely blows my mind that we’re standing here in 2016, in the midst of a major, five-year-long national discussion about income inequality, talking about proposals to eliminate New Jersey’s most progressive tax,” said Jon Whiten, vice president of the progressive think tank New Jersey Policy Perspective. TAX FAIRNESS Christie has been a driving force for what he’s called “tax fairness” throughout the debate. Christie said last week he would not sign the lawmakers’ proposal, but has not said specifically how he would pay for the trust fund or how he would reach a fair target. His position on New Jersey’s transportation funding paralleled his failed run for the White House last year in which he signed a pledge not to increase taxes. Americans for Tax Reform, which oversees the pledge, has said raising one tax while cutting another — thus producing a net neutral result — doesn’t constitute a violation of the pledge. “I’ve said all along I will not sign a gas tax increase unless it represents fairness for the people of New Jersey,” Christie said recently. THE TAX CUT COSTS The estate tax is paid by roughly 3,000 people currently, accounting for about $320 million in 2014 in state revenue, according to legislative estimates. The retirement income proposal could end up costing the treasury up to $125 million once it’s fully phased in, according to legislative estimates, while the changes to the Earned Income Tax Credit are less clear. Last year a 50 percent increase helped about 500,000 lower-income residents, according to the Christie administration.