New Jersey bid to revamp gas, sales taxes stalls

By MarketsReuters

A plan to hike New Jersey's gasoline tax, which has been flat for nearly three decades, was tabled on Thursday amid concerns that an accompanying sales tax cut could blast a $1.7 billion hole in future budgets.

Without reauthorization from lawmakers, the transportation program that pays for roads, bridges and mass transit with gas tax revenues loses its ability to borrow for new projects on Friday, when the new fiscal year begins. Construction on existing projects is expected to continue.

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Republican Governor Chris Christie hatched a late-night deal earlier this week with Assembly Speaker Vincent Prieto, a Democrat, to raise the gas tax by 23 cents, to 37.5 cents per gallon to replenish the fund.

In exchange, the statewide sales tax rate would shrink by 1 percentage point to 6 percent. But the Senate did not vote Thursday on the Assembly's legislation.

Senators could consider it next month, or they could continue pushing their own gas tax bill that would instead phase out New Jersey's estate tax on wealthy residents' assets after they die.

Prieto said he talked with Senate President Stephen Sweeney, also a Democrat, on Thursday but that the next step was "everybody getting in the room" over the next few weeks.

The reduction in sales taxes would strip $1.7 billion annually from the general fund after 2018, when the cut would be fully phased in. The state is already struggling to fund public pensions after several years of sluggish economic growth.

"Everyone's going to have to continue to make sacrifices. We're going to continue to see economic growth if we do things like cut the sales tax and put more money in consumers' pockets," Christie said on Wednesday.

Gasoline in New Jersey is cheaper than in any other state in the Northeast and most others across the country, according to GasBuddy.com data.

Cheap gas is considered one of the few economic perks of living in an otherwise high-tax state. New Jersey has the steepest property taxes in the country and ranks third-highest for combined state and local taxes, according to the Tax Foundation.

Christie's plan would fund the transportation program at about $2 billion annually for eight years and allow up to $12 billion of borrowing capacity for new projects over that period.

That $12 billion of bonds would pile onto the state's already high outstanding debt load of about $36 billion, which includes about $16 billion of existing transportation fund bonds. (Reporting by Hilary Russ; Editing by Dan Grebler)