As Roads and Bridges Deteriorate, New Jersey’s Gas Tax Hits All-Time Low
As we explained in detail last month, New Jersey is facing a transportation crisis. Our transportation network – crucial to our economic growth and prosperity – is deteriorating, and the funding source for it is just about broke.
To help put the state on the right course, NJPP has joined a handful of legislators and even the state Chamber of Commerce in calling for some sort of increase in the gas tax, which has not been increased in nearly a quarter-century and is the second lowest in the nation. We think broadening the sales tax to cover gasoline sales is the most productive option.
In our report we documented that the gas tax is worth a lot less as costs have risen and Jerseyans drive more efficient cars. A new national report from the Institute on Taxation and Economic Policy has now quantified that value loss and identified New Jersey as one of ten states where the purchasing power of the gas tax is at the lowest level ever.
In New Jersey, which first instituted a 2-cent-per-gallon gas tax in 1927, the current rate of 14.5-cents-per-gallon is far below the historical average purchasing power of 31.8-cents-per-gallon. And despite the low “sticker price” of the early years of the Garden State’s gas tax, the actual value (in 2014 levels) was highest in the early 1930s, a few years after the first tax hike (to 3-cents-per-gallon) and as deflation hit the nation in the Great Depression. Even with the latter as a historical anomaly, the actual value of New Jersey’s gas tax stayed relatively high (above 30-cents-per-gallon) until the late 1970s. Since then, it’s been steadily decreasing, albeit with a minor uptick when the tax was slightly increased in 1988 and again in 1990.
This new data adds to the overwhelming mound of evidence that it’s high time New Jersey increase its gas tax. And if the state actually wants to turn its serious transportation woes around, that increase must be substantial.