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How N.J.'s 23-cent gas tax increase could fluctuate

Thursday, June 23, 2016   (0 Comments)
Posted by: Aidan Sander
Share | 06/23/16

Lawmakers behind a proposed 12.5 percent tax on gasoline sold in New Jersey announced the tax rate could fluctuate from year to year as gas prices and consumption rise and fall. Sens. Steve Oroho (R-Sussex) and Paul Sarlo (D-Bergen), sponsors of the plan to raise money for transportation projects, said Wednesday they will amend the legislation to charge motorists less if gas prices or consumption increase, bringing in higher revenue than expected, or more if they decline, bringing in less.

The proposed amendment would effectively freeze the amount of money the state expects to collect from the tax to the amount of revenue it collects in the first year. A 12.5 percent tax on gas is about 23 cents a gallon, based on current prices, and would generate about $1.4 billion in tax revenue for the Transportation Trust Fund. The new tax would be charged in addition to a 14.5-cent-per-gallon tax drivers already pay.

If the tax increase becomes law, drivers will pay a 12.5 percent tax the first year. According to the sponsors, the state treasurer would then adjust the tax rate up or down each year based on consumption forecasts to bring in approximately the same amount of money each year. There will also be a smoothing effect, so if the tax comes up short one year, drivers will have to make up for it in the next. And if the state collects too much in one year, drivers will get a discount the next year.

The change would eliminate the need for a tax cap the sponsors included in the original bill, introduced Monday in the Senate and Assembly. That would have limited the 14.5 cent-a-gallon and 12.5-percent taxes on gasoline to 52 cents per gallon. With $1.4 billion in new funding a year, lawmakers said they expect to be able to finance a 10-year, $20 billion transportation program.

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