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New Jersey gas tax bill undermines low prices at the pump

This is Part 3 of a series about poverty in New Jersey.  Read Part 1 and Part 2.

While plummeting gas prices are leaving more money in the pockets of impoverished Americans across the country, New Jersey citizens could face a tax burden that would undermine this bonanza.

On top of all of New Jersey’s high tax issues, Assemblyman John Wisniewski (D-Middlesex) recently introduced a bill (A-3886) that would increase the gas tax by a minimum 25 cents a gallon, costing the average New Jersey motorist about $300 a year.

Wisniewski’s bill would not change the state motor fuels tax, 10.5 cents a gallon tax on retail gas purchases at the gas pump, which goes into the transportation trust fund.  But the bill would increase the state’s petroleum products gross receipts tax, from the current 4 cents per gallon to a minimum of 29 cents per gallon on wholesale purchases of gasoline.

In order to make this increase, Wisniewski wants to change the way the petroleum gross receipts tax is calculated so that distributors will be charged 9 percent of the retail price of gasoline rather than charged the current 4 cents per gallon. Taxes under Wisniewski’s proposed method would rise with rising gas prices.

However, Wisniewski’s  bill sets August 2014 gas prices as a minimum baseline for calculating the new tax, preventing the tax from going down as the price of gas falls, as it has since August.  Therefore, the combined retail and distributor taxes would bring the total to a minimum of about 40 cents a gallon and would rise with any increase in the price of gas. This would make New Jersey’s gas tax up there with New York, until gas prices rise again and then they would exceed New York.

Remember, the New Jersey gas taxes are in addition to the federal 18.4 cents a gallon gas tax for a total of 50.4 cents and rising with gas prices.  Not to be outdone, Sens. Chris Murphy (D-Conn.) and Bob Corker (R-Tenn.) have proposed a bipartisan Senate bill to raise the federal gas tax.

The Murphy-Corker plan would raise the gas tax by 12 cents over the next two years, and is projected to raise $164 billion over the next decade.  The proposed bill would index the gas tax to the Consumer Price Index, guaranteeing an annual increase.

Wisniewski’s bill would also increase the annual minimum amount of the tax going to the transportation trust fund from the current constitutional amount of $200 million to $1.45 billion, or a $1.25 billion increase, in order to fill an estimated shortfall of $800 million.

Before raising the gas tax, the New Jersey Legislature should determine why it costs New Jersey over $2 million a mile to build a road, which is more than any other state and about twice the amount New York and Connecticut spend.  The Legislature should also examine why the Garden State’s administrative costs per mile are 4 times those of the average state.

Raising the cost of fuel will only drive more jobs out of the state, contributing to New Jersey’s already rising poverty rate.

This is Part 3 of a series about poverty in New Jersey.  Read Part 1 and Part 2.

Featured image from Shutterstock

Richard Miner

Richard is a retired corporate attorney. In New Jersey, he was General Counsel of Mohawk Data Sciences, a NYSE-listed computer company, and VP and General Counsel of Momentum Technologies, a privately held computer company. He has a J.D. from Columbia Law School, a Masters in Corporate Law from NYU Law School, a B.A. in Economics from Brown University, and a certificate in Corporate Financial Management from NYU Stern School of Business. Raised in Ridgewood, NJ and a graduate of Ridgewood High School, he enjoys downhill skiing and races Lightning sailboats from his home at Lake Mohawk, NJ.

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Categories: Economy / Business, Must Read, Policy, Tax
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