Explainer: How a constitutional amendment would change New Jersey’s gas tax

New Jersey brings in roughly $750 million each year from taxes on gasoline, diesel fuel and other petroleum products, but not all of that money is fully dedicated to repairing the state’s roads, bridges, and mass-transit network.

What’s more, if Gov. Chris Christie and legislative leaders ultimately strike a deal this summer to increase the gas tax to renew the state’s nearly broke Transportation Trust Fund (TTF) – a deal currently on the table calls for a hike of 23 cents – there’s no real guarantee in place that all of the new revenue generated by the increase would be set aside for transportation projects. 

Ballot Question

Voters will have a chance in November to put firm protections in place under a proposed constitutional amendment. If that ballot question is approved, it would mean all revenue raised by New Jersey’s current fuel taxes would be constitutionally dedicated to funding no other purpose but transportation-system upgrades. And if Christie and lawmakers do decide to increase any fuel taxes this summer, the same language would also make sure all new revenue would be put in the same transportation-only lockbox.

CONSTITUTIONAL AMENDMENT TO DEDICATE ADDITIONAL REVENUES TO STATE TRANSPORTATION SYSTEM

Do you approve amending the Constitution to dedicate all revenue from the State motor fuels tax and petroleum products gross receipts tax to the Transportation Trust Fund?

This amendment would provide that an additional three cents of the current motor fuels tax on diesel fuel, which is not dedicated for transportation purposes, be dedicated to the Transportation Trust Fund.  In doing so, the entire State tax on diesel fuel would be used for transportation purposes.  The entire State tax on gasoline is currently dedicated to the Transportation Trust Fund and used for transportation purposes.

The amendment would also provide that all of the revenue from the current State tax on petroleum products gross receipts be dedicated to the Transportation Trust Fund.  In doing so, the entire State tax on petroleum products gross receipts would be used for transportation purposes. 

This amendment does not change the current tax on motor fuels or petroleum products gross receipts. 

Fuel taxes currently on the books: New Jersey motorists pay a 10.5-cent per gallon tax on gasoline they buy at the pump. A 4-cent per-gallon tax is also levied on the gross receipts of petroleum products. That tax is charged at the wholesale level, but is passed on to motorists, leaving New Jersey’s total gas tax at 14.5 cents. For those buying diesel fuel in New Jersey, the tax is 13.5 cents per gallon.

Not all of the estimated $750 million that New Jersey’s fuel taxes currently bring in is constitutionally dedicated to paying for only transportation projects. Revenue linked to the first 10.5 cents of the diesel tax is covered with a constitutional protection, but not the remaining three cents, which accounts for roughly $20 million in additional funds. Revenue from the tax on the gross receipts of petroleum products is also dedicated up to $200 million, leaving out about $15 million that’s also coming in under the current rate.

Another $200 million in revenue from the state sales tax is dedicated to funding transportation projects, but that is not impacted in any way by the proposed amendment going before voters in the fall.

Many transportation advocates believe it’s simply good policy to dedicate all revenues raised from fuel taxes to pay for transportation-infrastructure improvements. But passage of the proposed constitutional amendment this fall would also mean any new revenue generated from any fuel-tax increases would be dedicated in the future to transportation as well.

Gas tax to nearly triple

Governor Christie, a second-term Republican, and Democratic legislative leaders are in agreement that the per-gallon gas tax should be increased by 23 cents up to 37.5 cents to renew funding for the TTF.

What you would pay today under a higher gas tax

Gallon of Regular gasoline $1.71 (N.J. gas tax included)

Add 37.5 cents

New cost would be approximately $2.09

Transportation funding on-hold

The last five-year finance plan for the fund ran out on June 30, and Christie administration officials estimate there’s only enough money left in the tank to get through the end of this month.

What’s holding up a deal is an ongoing disagreement between Christie and Senate President Stephen Sweeney (D-Gloucester) over proposed tax cuts that Christie and other Republicans have called for in addition to the gas-tax increase to help offset its impact on taxpayers.

Christie favors a one percent reduction of New Jersey’s sales tax, while Sweeney favors phasing out the estate tax and several other smaller cuts. Sweeney is also concerned that taking a percent off the sales tax would take too much money – an estimated $1.6 billion – out of the state budget.

Because they’ve yet to strike a deal, Christie has frozen all state-funded road, bridge and rail projects to ensure the TTF’s money is available for only essential work.

If their impasse eventually breaks, the proposed 23-cent increase supported by both Christie and Sweeney would be applied to the gross receipts tax that’s levied at the wholesale level. So if the ballot question is approved this November, all revenue from the increase would be constitutionally dedicated to funding transportation.

Is the ballot question likely to pass?

The results of a recent survey conducted by Fairleigh Dickinson University’s PublicMind Poll found 51 percent of New Jersey’s registered voters support the proposed constitutional dedication of all fuel-tax revenues to transportation. But 49 percent said they either don’t agree with the dedication or don’t know anything about it. Still, that marked a slight improvement from January, when registered voters were deadlocked at 49 percent to 49 percent on the same question.

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NJ Spotlight, an independent online news service on issues critical to New Jersey, makes its in-depth reporting available to NewsWorks.