Plunging Gasoline Sales Could Mean NJ Gas Tax Hike This Fall
All the social distancing and staying at home could have an unintended consequence this fall: An increase, perhaps even a significant one, in New Jersey’s gas tax.
A formula in the 2016 state law that raised the tax nearly 23 cents a gallon also allows for yearly adjustments to make sure the gas tax generates a steady amount of revenue, just under $2 billion.
If sales go down, the tax goes up. And right now, they’re going down drastically.
“Obviously lower volumes and lower activity in our transportation system is going to cause an automatic need – and that’s how the legislation is written, right? – an automatic need to raise the tax,” said Regina Egea, president of the Garden State Initiative, a conservative think tank. “And we think that’s the wrong thing to do, given we’re going to be in recovery ideally in the fall.”
The state Treasury Department hasn’t issued monthly revenue reports since the coronavirus crisis began, but it said in a notice to bond holders March 23 that collections of motor fuels taxes and others have been reduced significantly.
Egea said the gas stations’ association has estimated a 65% drop in gas sales. GSI says a comparative analysis by the crowd-sourced traffic site INRIX estimates that passenger travel in New Jersey was 55% lower on March 24 than on the same day a month earlier.
Egea said the increase can be avoided if the Legislature steps in and passes a law changing the 2016 legislation. She said it would have to be done before Aug. 31, the deadline for calculating the increase based on past-year collections and future projections. Any increase would take effect Oct. 1.
“It’s just something, one more item that the Legislature is going to have to deal with, and frankly I think it’s to the overall economic benefit of all the residents and all the businesses, this has to be part of their consideration when they do the budget,” Egea said.
Egea said the formula should be changed permanently to require a law to be passed each time the tax goes up, rather than have it be determined by the state treasurer, in consultation with the top finance official for the Office of Legislative Services.
“Every other tax increase has to voted on by the Legislature,” she said. “This one was delegated, and I think it ought to be back and they ought to have it on their record.”