TRENTON--A new analysis from New Jersey Policy Perspective says a solution to fiscal problems left from years of mismanaging state finances should include the gas tax and other car-related revenue sources. Gas Tax Talk Leads Down the Right Road by NJPP Research Director Mary E. Forsberg shows how New Jersey could realize about $2.6 billion a year in new revenue with no borrowing by the state.

"For too long, New Jersey has shied away from greater use of gas taxes and other driving-related fees, to the detriment of the state's infrastructure and the economy it supports," the report says. New Jersey motorists pay 14.5 cents per gallon in taxes on gasoline. This is the third lowest level in the US, but it's a false savings. Why? Because the Transportation Trust Fund the state established in 1984 to assure adequate funding for roads and mass transit is running on empty. The state needs to do more to maintain and improve its transportation system, an imperative made all the more crucial by the role that moving goods and people plays in New Jersey's prosperity.

The report suggests these sources of new revenue:

A 20-cent per gallon gas tax increase would generate approximately $1 billion each year.

Applying the sales tax to gasoline would raise about $900 million a year if gas costs $3 per gallon.

Doubling registration fees on newer cars weighing under 3,500 lbs. and tripling fees on cars weighing over 3,500 lbs. would increase motor vehicle fee revenue by $480 million a year.

Increasing the energy conservation fuel fee to 2 percent on cars costing $35,000 and up would generate about $145 million a year.

Doubling drivers' license fees to $48 for a 4-year license will raise an additional $34 million a year.

New Jersey's tax on gasoline is lower than that of neighboring states and below the national average. With or without a financial crisis, the time is overdue for the state to bring the gas tax and related fees more in line with the needs this revenue is supposed to meet. At the same time, the fee and tax system should do better than it does today at taking into account the impact that heavier, less fuel efficient vehicles have on the transportation infrastructure and also the income level of the people who own those vehicles.

Gas these days is not cheap. But the price in New Jersey has been kept artificially low by the unwillingness over the years of elected officials to face up to the needs of the state. Waiting doesn't make this any easier. As it turns out, it would have been less risky, politically, to raise the gas tax in the 1990s when prices were lower than today and the economy was in better shape. But now the state is, indeed, in a financial crisis. No reasonable revenue options can be overlooked.

As the reaction to proposed highway toll increases is showing, no solutions will be universally applauded.

But, employing gas taxes and car-related fees as part of an overall solution would produce significant revenue while also calling upon a majority of New Jersey residents, regardless of where in the state they live, to have a role in repairing the state's finances. And, it allows for some mechanisms to base each person's contributions on his or her ability to pay.

TAX REFORM

WORK & WAGES

BUDGET & FISCAL POLICY

TRANSIT ISSUES

ECONOMIC DEVELOPMENT

VOTING & GOVT REFORM

© 2008 New Jersey Policy Perspective