New Jersey Considers Replacing Gas Tax

NEW JERSEY — New Jersey could get rid of the gas tax now that it's jumped astronomically in recent years. But even if the state moves forward, drivers will still find themselves digging in their pockets if they want to hit the road.

State officials say they're looking into replacing the gas tax with a mileage fee, a plan that would help New Jersey deal with the rising numbers of electric cars that have hit the road.

With a mileage fee, each car would have to be equipped with mileage counter that tracks usage.

The state Department of Transportation, along with the Eastern Transportation Coalition, a partnership of 17 states and the District of Columbia formerly known as the I-95 Corridor Coalition, told Patch it's studying the feasibility of a mileage-based user fee as a sustainable alternative to the gas tax.

A spokesman for the department, Stephen Shapiro, said the results of the study are not yet available. "Until such time, there is no plan to utilize a mileage-based user fee as a replacement for the gas tax," he told Patch.

Transportation Commissioner Diane Gutierrez-Scaccetti told News12, however, that the state needs to be thinking about the future, and that switching from a gas tax to a mileage fee would address the potential revenue loss caused by less gasoline usage. But she also acknowledged that a change to a mileage fee could raise new concerns.

“People are very concerned about putting any type of an onboard unit in their car. When E-ZPass started, it was the same thing," she told News12. "We’re not interested in where people are going,”

Last year, the New Jersey gas tax jumped as the state dug itself out of a financial hole caused by the coronavirus crisis.

Lower fuel consumption trends, which were exacerbated by the COVID-19 pandemic, necessitated a gas tax increase of 9.3 cents per gallon, state officials said.

Due to the formula explicitly outlined in the law, the tax rate on gasoline and diesel fuel increased on Oct. 1 from 30.9 cents to 40.2 cents for gasoline and from 34.9 cents to 44.2 cents for diesel fuel, officials said.

When coupled with the current 10.5 cent motor fuels tax rate on gasoline and the 13.5 cent rate for diesel fuel, the total tax rates for gasoline and diesel fuel are now 50.7 cents and 57.7 cents, respectively.

The tax hike complied with the 2016 law that requires a steady stream of revenue to support the state’s Transportation Trust Fund program. If there are not enough funds, the gas tax rises every Oct. 1.

Under the 2016 law signed by Gov. Chris Christie, New Jersey’s TTF program is required to provide $16 billion over eight years to support critical infrastructure improvements to the state’s roadways and bridges, officials said in a press release.

In order to ensure the state has the funds necessary to support these projects, the law dictates that the Petroleum Products Gross Receipt (PPGR) tax rate must be adjusted accordingly to generate roughly $2 billion per year, the release said.

“As we’ve noted before, any changes in the gas tax rate are dictated by several factors that are beyond the control of the administration,” said state Treasurer Elizabeth Maher Muoio. “The law enacted in 2016 contains a specific formula to ensure that revenue is meeting a certain target.

The state legislature approved a plan five years ago to raise gas taxes by 23 cents, a Christie-backed plan that took effect Nov. 1, 2016. The state Senate voted 24-14 to approve the plan, while the state Assembly voted 44-27 to approve it, with nine not voting, soon afterward.

Read more: N.J. Gas Tax Hike: What You Need To Know

That year, the state's gas tax increased by 23 cents a gallon to 37.5 cents, an amount that was still less than the neighboring states of New York, Pennsylvania and Connecticut, according to supporters.

As part of the package, the sales tax was to be reduced by one-third of a penny over two years. On Jan. 1, 2017, the sales tax went from 7 percent to 6.875 percent. That was followed by a decrease to 6.625 percent on Jan. 1, 2018, for a total reduction of 0.375 percent.

"When it does not, the gas tax rate has to be adjusted accordingly in order for us to meet our obligation under the law and fully fund the state’s many pressing transportation infrastructure needs," Muoio said. "Highway fuels consumption took a significant hit in FY 2020 because of the economic downturn caused by the COVID-19 pandemic.”

Officials noted that consumption of gasoline declined by a total of 38.7 percent from March to May 2020, while diesel fuel consumption declined by 16.5 percent. Consumption of gasoline and diesel fuel continues to be depressed as many people continue to work from home and limit extracurricular activity, officials said.