NJ’s Low Gas Tax May Be Hiked in Tax Cut Swap


New Jersey residents would pay more in gas taxes but see estate and retirement income taxes cut and the creation of a charitable tax deduction under a new state Senate proposal.

Democratic state Sen. Paul Sarlo unveiled the framework, which includes an increase in the transportation trust fund from $1.6 billion to $2 billion, on Tuesday at a budget committee hearing with the Christie administration’s top transportation officials.

“We believe a $2 billion transportation trust fund is needed,” Sarlo said. “It has got to be a dedicated source of revenue, multiyear plan.”

If the Legislature has a plan, the governor is eager to hear it, Transportation Commissioner Richard Hammer said. He said a multiyear plan would be a positive for the department.

The proposal is the latest in a long-running conversation between Republican Gov. Chris Christie and the Democrat-led Legislature over how to pay for the state’s $1.6 billion transportation trust fund, which is on track to go broke by summer.

Hammer said the fund has enough cash — about $83 million — to carry into early August, roughly a month beyond the July 1 deadline when legal authority to borrow money runs out.

The disagreement centers on whether to raise the state’s 14.5-cent gas tax, which is the second lowest in the country. Democrats say it’s necessary to invest in infrastructure but Christie argues that residents pay enough to the state already and has called for “tax fairness,” or lowering other taxes if the gas tax is hiked.

It’s not the first time Sarlo has called for lowering some taxes in exchange for raising the gas tax. In December, he announced a plan to cut estate and retirement taxes and raise the gas tax, but Christie panned the idea.

Tuesday’s proposal is similar, but adds the creation of a charitable tax deduction, which is allowed on federal income tax returns but not at the state level. Christie raised the prospect of a charitable tax deduction last week, but stopped short of linking it to transportation funding.

Under current law, New Jersey imposes a tax on estates of $675,000 and above, the lowest exemption level in the country. Christie has called for phasing it out completely, and lawmakers have signaled they would support raising the threshold.

New Jersey also imposes taxes on retirement income of $20,000 and above for married couples. The state Senate’s plan proposes over a three-year period the threshold to $100,000 for married couples.