The state tax on a gallon of gasoline will rise 9.3 cents to 50.7 cents on Oct. 1, the state treasurer announced Friday.GETTY IMAGES / ISTOCK
In just over a month, drivers will shell out more than 50 cents for state taxes on every gallon of gasoline they pump in New Jersey.
The state treasurer announced Friday the tax rate will climb 9.3 cents per gallon on Oct. 1 to make up for a shortfall in gas tax collections over the past year and to ensure the tax brings in $2 billion this year to fund road and rail projects across the state.
The tax hike is the biggest since Gov. Chris Christie and the state Legislature struck a deal in 2016 to add 23 cents to every gallon, raising the gas tax for the first time since 1988.
That law says the treasurer should analyze tax collections each year and adjust the tax rate on motor and diesel fuels to ensure they bring in $2 billion a year — enough cash to pay the bills for road and rail projects around the state.
From July 1, 2019, to June 30, 2020, gas tax collections were $154 million off that target, according to the Treasury Department, which estimated a more than 20% increase in the tax is needed to generate $2.1 billion next year, a figure that takes into account last year’s loss and this year’s forecast.
It’s no surprise that gas tax revenue declined. The state’s virtual shutdown took drivers off the road and slowed fuel demand. Many workers are still working from home.
“Highway fuels consumption took a significant hit in FY 2020 because of the economic downturn caused by the COVID-19 pandemic,” Treasurer Elizabeth Muoio said in a statement.
Traffic on the New Jersey Turnpike from January to July was down 29%, bottoming out in April, when turnpike transactions off 63%. Parkway traffic was 24% lower in the first seven months of 2020 than the same period in 2019, according to turnpike authority records.
Nationally, total petroleum demand through July was about 12% lower than the same point in 2019, according to the American Petroleum Institute.
Here in New Jersey, vehicle miles traveled in June were down by 16% compared with June 2019. That’s a marked improvement from May, when traffic slowed by 40%, according to the most up-to-date data from the Federal Highway Administration.
Tom Kloza, a global petroleum analyst for the Oil Pricing Information Service in Wall, said he doesn’t expect the country to ever get back to the demand seen in recent years, and gas taxes are likely to creep up across the country.
“I see a number of states, particularly blue states, but all states. They have to balance budgets eventually and they have to look for additional revenue. And because the price of oil is 40% of where it was 12 years ago, it’s probably one of the easiest ways to gain revenue.
“You’re going to need more revenue, because instead of national selling 9.3 million barrels a day of gasoline on which they collect taxes, it’s going to be considerably less than that,” he continued.
For now, New Jersey’s gas tax will shoot up from 10th-highest in the U.S. to fourth, behind only California, Pennsylvania and Illinois. The new rate is more than 7 cents higher than New York’s and nearly 28 cents higher than in Delaware. Pennsylvania levies 58.7 cents on every gallon.
Prior to the 2016 tax hike, New Jersey’s tax on gasoline was cheaper than every state besides Alaska. The state shot way up the list when it tacked on another 23 cents that fall. The new revenue is meant to support an eight-year, $16 billion Transportation Trust Fund program.
Faced with a shortfall in 2018, Murphy’s administration raised the rate 4.3 cents per gallon. There was no change in the rate last year.
Sal Risalvato, executive director of the New Jersey Gasoline, C-Store, Automotive Association, warned the 9.3-cent increase will devastate station owners, particularly those along the border with New York.
“We have zero competitive advantage over New York,” he said. “We’ve already lost enough gallons to them from previous increases.”
Risalvato has warned the state is caught in a loop wherein higher gas taxes here depress consumption, which then forces state officials to levy fresh gas taxes each fall.
“It is costing New Jersey $190 million a year in revenues that we’ve lost because of gallons that are going to, mostly New York, but New York and Delaware,” he said.
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World news – US – Why your gas tax will rise 9.3 cents a gallon — and N.J.’s new ranking compared to all the states
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