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New Jersey: sales tax decrease could offset gas tax hike


 When one tax rate goes up, another must go down.

Update, 7.1.2016: New Jersey lawmakers were unable to agree on a tax deal, so gas tax and sales tax rates in New Jersey remain the same. As a result, Gov. Christie has declared a State of Emergency and ordered an orderly shutdown of “all ongoing work that is funded by the TTFA [New Jersey Transportation Trust Fund Authority]. 

New Jersey Governor Chris Christie (R) and the Assembly made a deal in the wee hours of Tuesday morning to increase the gas tax rate by 23 cents per gallon and lower the sales tax rate by 1%. The Senate has until the end of Thursday to approve or reject it, or to come up with an alternative plan to renew the state’s ailing transportation trust fund. Beginning July 1, the current level of transportation funding is only enough to make debt payments, not fund projects.

Senate Majority Leader Loretta Weinberg says the Senate “is not prepared to support this plan.” They worry a sales tax rate decrease would negatively impact the budget and imperil the state pension payments that are mandated by the constitution. The Senate’s plan to offset a gas tax increase by phasing out the estate tax and increasing the Earned Income Tax Credit is preferred by many.

“…money in the pockets of the working poor”

Assembly Speaker Vincent Prieto (D) praised the proposed sales tax reduction, “We are going to lower a tax that will affect the 9 million residents of New Jersey — that is money in the pockets of the working poor.”

Yet although the Assembly passed the governor’s funding plan, it did not do so unanimously. Democratic Assemblyman John Wisnieswki said, “What we’re doing tonight is wrong. It creates a hole in the budget at a time when we’re already having trouble paying the bills that we all recognize we have not been able to pay.”

Governor Christie has been vocal in his support of the plan, speaking of the need for tax fairness:

“If we’re giving [the people] a tax increase in one area because we think that area is important, having good roads, good bridges, good mass transit systems, then we need to give them a tax cut someplace else.”

Under his plan, he said, the average New Jersey driver would pay approximately $200 more in gas tax and save approximately $465 in sales tax annually.

If the Senate approves the plan as written, the sales tax rate would drop from 7% to 6.5% on January 1, 2017 and then drop to 6% on January 1, 2018. See the text of A-12 for additional details.

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Gail Cole
Avalara Author
Gail Cole
Gail Cole
Avalara Author Gail Cole
Gail began researching and writing about sales tax in 2012 and has been fascinated with it ever since. She has a penchant for uncovering unusual tax facts, and endeavors to make complex sales tax laws more digestible for both experts and laypeople.