At the end of June, New Jersey’s Gov. Chris Christie declared a state of emergency, calling for the “immediate and orderly shutdown” of all work on the state’s transportation systems that the Transportation Trust Fund Authority (TTFA) funds. This move put almost all of the Garden State’s transportation projects on hold.
Explaining the situation at the time, we noted that this problem, years in the making, was largely due to the insufficient gas tax of 14.5 cents, the second lowest in the country, which lawmakers have not increased since 1988.
The Governor has been opposed to increasing the gas tax, but in a late September press release, he announced a plan, with bi-partisan agreement, to resolve the TTFA funding impasse; the plan comes along with some broad based tax cuts that “every New Jerseyan” will enjoy. Accordingly, motorists will see a 23-cents per gallon increase in the gas tax, to 37.5 cents, which will cost the average driver between $184 and $276 per year. The plan calls for $2 billion over the next 8 years.
Lawmakers also want to dedicate all of the gas tax revenue to infrastructure. To this end, there is a legislatively proposed amendment to the New Jersey Constitution up for a vote this November, Public Question 2, also known as the New Jersey Dedication of All Gas Tax Revenue to Transportation Amendment. A yes vote would commit all revenue from gas taxes to transportation projects.
Because the state Department of Transportation (DOT) and U.S. DOT have estimated that the average NJ driver spends approximately $600 per year on vehicle repairs caused by bad road conditions, the press release asserted that the average New Jersey driver will see a potential reduction of vehicle expenses by $600.
Additionally, “[t]he people of New Jersey will pay hundreds less in taxes each year,” for a total savings of $164 million in 2017. When fully phased-in by 2021, that figure is expected to reach $1.4 billion.
The press release highlights the following areas of tax cuts, as provided for in Assembly bill 12:
- Sales Tax Cut: On January 1, 2017, the sales tax will go from 7 percent to 6.5 percent. On January 1, 2018, the sales tax will drop again, to 6 percent. This is the first statewide tax cut in New Jersey since 1994.
- Tax Savings for the Working Poor: Beginning in tax year 2016, the Earned Income Tax Credit for the working poor will increase to 40 percent of the federal benefit on or after January 1, 2016.
- Tax Savings for Retirees: The state’s gross income tax exclusion on pension and retirement income over four years will increase to $100,000 for joint filers, $75,000 for individuals, and $50,000 for married/filing separately.
- The Estate Tax: New Jersey’s estate tax will be phased out and ultimately eliminated for decedents dying on or after January 1, 2020.
- Tax Savings for Veterans: All New Jersey veterans honorably discharged from active service in the military or the National Guard will gain a personal exemption on state income taxes.
Assembly bill 12 was passed by both houses on October 7, 2016, and Gov. Christie is expected to sign it into law.