Dems Plan Push for Gas Tax: ‘Impasse is Not an Option’
Lawmakers over the next seven days will make a bid to end a construction-funding impasse that has entered its fourth week and temporarily cost around 1,000 people or more their jobs.
The Transportation Trust Fund, which New Jersey has used for the last 30 years to pay for bridge, rail and road projects, is nearly broke. It entered the new fiscal year July 1 without a way to pay for projects, beyond the $16 billion in debt it has accumulated.
Gov. Chris Christie has indicated he’s willing to enact a hike in the gas tax, but he says the 23-cent per gallon hike that would cost drivers $1.2 billion should be offset by a broad-based tax cuts that’s bigger. The NJ Assembly agreed with his last-minute offer to cut the sales tax a penny per dollar, or $1.6 billion.
The Senate wouldn’t go along with the idea. The Senate prefers a targeted tax-cut package worth around $900 million that includes cuts in taxes on estates and retirement income. Last Friday, Assembly Speaker Vincent Prieto, D-Hudson, agreed to a modified version of that approach, after Christie’s latest offer proved to be a nonstarter.
“Obviously that counteroffer was not something that was acceptable,” Prieto said. “An impasse is not an option. So that’s why this approach is being taken at this point in time. Hopefully we can be successful. And I’m still willing to compromise even further. But we have to get it done.”
“The biggest, biggest problem for me is that an impasse is not acceptable,” Prieto said.
It’s not clear whether Christie would agree to this version of the plan. He didn’t like the initial version, which included aspects that helped the wealthy, by phasing out the estate tax, and the poor, by hiking the earned income tax credit, and the elderly, by cutting taxes on retirement income.
“Never in my lifetime did I think we would be able to figure out the type of tax cuts that we’ve got here,” said Senate President Stephen Sweeney, D-Gloucester.
Those are still in the plan, as are tax breaks for veterans and drivers with incomes up to $100,000 – though the latter tax break would be significantly smaller than the additional tax at the gas pump.
“I’m not going to rule out the governor on this. Do I expect him to accept it right now? No. But let’s see what happens when the Legislature passes it in both houses,” Sweeney said.
“If the governor chooses not to sign it, well then things are going to come to a halt,” Sweeney said.
Unless the Legislature can override Christie’s veto. Lawmakers had been working toward that as a resolution, which would be unprecedented in Christie’s tenure, before the Assembly switched gears to the sales-tax approach.
“We wholeheartedly expect our Republican colleagues that made commitments to us, that they’re going to stick to them. We really expect that,” Sweeney said. “There were enough commitments from the Republicans in the Assembly last time to override. They just, you know, it was kind of difficult back then because everyone was getting a little scared to do it.”
The Senate Budget and Appropriations Committee, which already endorsed an earlier incarnation of the estate/retirement tax-cut plan, will meet Friday to consider the new version.
Presuming it passes, the full Senate could approve it at a voting session scheduled for next Monday.
That sends it to the Assembly and an uncertain fate. Prieto opted for Christie’s surprise sales-tax deal because he couldn’t get to a veto-proof majority of 54 votes on the original plan. He said he doesn't yet know when the Assembly would vote on the bill.
“This is something that we would have to get substantial Republican support to be able to get it accomplished in both houses,” Prieto said.
It remains to be seen whether the changes to the plan help change any minds. A $3,000 tax exemption for veterans would be politically popular. The income-tax deduction for gas taxes was made a lot more expansive than it had been when first pitched in early June and would now be available for taxpayers with incomes as high as $100,000.
“That’s part of that that was done. It’s also for tax fairness,” Prieto said of the gas-tax deduction. “… I think it’s a great way to offset some of the increases that we’re doing with the gas tax.”
It’s not clear how the deduction would work, which is a concern, said Jon Whiten, deputy director of New Jersey Policy Perspective.
“It’s very unusual. I’m not sure if any other states have that kind of mechanism,” Whiten said. “… It’s not a bad idea. And I understand that it’s kind of being done to have the people in New Jersey shoulder a little less of the burden than the people that pass through. And I get that. But at the same time, I’m not really sure how it’s going to work in practice.”
The impact would be small. For someone with an income of just below $100,000, lowering taxable income by $500 would save around $30 in income taxes. For taxpayers with smaller incomes, being taxed at lower rates, the impact would be even smaller.
The total tax savings from the deduction would amount an estimated $20 million a year. The tax exemption for veterans would save them $23 million annually.
New Jersey Policy Perspective remains opposed to the overall plan, as do other like-minded progressive groups such as the Sierra Club.
“It’s a new proposal that is almost exactly like the first proposal. So from our point of view, not much has changed,” Whiten said. “It’s still a proposal that unnecessarily damages New Jersey’s budget and unnecessarily gives some very big tax cuts to the wealthiest heirs of big estates.”
One big political question worth watching: Will officials sympathetic to such concerns nevertheless become willing to support the plan, given the impact on the budget of the sales-tax alternative? Sen. Raymond Lesniak, D-Union, had opposed the plan in June but said Friday he would support it now, though in doing so he also called for passage of a change to corporate taxes he has been advocating.
Whiten says it’s an interesting political question that only lawmakers will be able to answer.
“What we saw is the governor very successfully shifted the goal posts. As he’s pretty good at doing, he changed the conversation,” Whiten said. “So we went from having a conversation about ‘Was $900 million in revenue loss too much?’ to a conversation about ‘Is $900 million in revenue loss better than $2 billion?’ From our point of view, that’s still the wrong conversation to be having, and we should still be having a broader conversation about whether or not $900 million is too much.”
Often forgotten in Trenton’s debate over tax cuts is that the plan also includes an immediate 23-cent per gallon hike in the gas tax, which will cause some lawmakers to vote against it no matter what tax cuts are included.
“We all want safe roads and bridges, but our constituents have made it clear that they can’t afford a billion dollar tax increase,” said Sen. Jennifer Beck, R-Monmouth, who called the “cosmetic changes” to the plan “window dressing.”