TRENTON - With rates near the lowest in the country, New Jersey charges less in gas tax and car registration fees than it could, or should, according to a report released today by New Jersey Policy Perspective. The report calls for a 10-cent per gallon increase in the gas tax and a change in the car registration fee structure that would both take into account a vehicle's value and raise fees for the biggest, heaviest vehicles on the road.

"When compared to other states and its own needs, New Jersey is undercharging motorists," the report said. "Maintaining such a policy has serious financial and quality-of-life implications for all New Jerseyans." Perspective on The Gas Tax and Car Registration Fees was written by Mary E. Forsberg, NJPP Senior Policy Analyst. NJPP is a nonprofit, nonpartisan organization that conducts research on state issue with the aim of broadening debate in major policy areas.

New Jersey charges a tax of 10.5 cents per gallon for gasoline and 13.5 cents for diesel fuel. The maximum yearly car registration fee is $73.50 - down $20 from 10 years ago. The report notes an ironic situation: when NJ Transit bus and rail fare increases were approved in January the action was in part defended on grounds that they had not risen since 1991 - but New Jersey's gas tax hasn't been increased since 1988.

Among the report's findings:

• Only two states - Georgia and Alaska - have a lower gasoline excise tax than New Jersey.
• All but four states - Georgia, Alaska, Minnesota and Indiana - have raised their gas tax since New Jersey last did.
• When gas tax and registration fees are calculated on a per capita basis, only two states - Georgia and New York - charge less.

The rates New Jersey charges cause such serious problems as:

• Loss of needed state revenues
• The need to find money elsewhere for transportation improvements at a time of economic recession that increases pressure on the state budget
• Missed opportunities to discourage sprawl and pollution

"As the report notes, the statistical evidence strongly shows the merits of raising the gas tax and registration fees in New Jersey," said NJPP President Jon Shure. "It seems that the barriers to change are political. Elected officials fear that if they support increases they will be criticized by opponents and voted out of office. But New Jersey deserves better than fear-based policymaking. We need an honest discussion about transportation needs in this state, about the costs of driving, about who should bear those costs and how,"

The report makes four recommendations:

1. Raise the gas tax to 20.5 cents per gallon, adding $450 million in yearly state revenue.

Today's artificially low gas prices mean that transportation costs must be borne by a greater than advisable degree through means other than user fees. And it also encourages people to drive more, pay little attention to fuel efficiency and select bigger cars than needed. At that tax level, a gallon of gas in New Jersey would still cost less than in New York, Pennsylvania or Connecticut.

2. Change car registration fees to include value of a vehicle; raise fees on biggest, most expensive vehicles.

Wyoming charges $455 to register a new Ford Explorer, compared to $73.50 in New Jersey, where fees are based only on a vehicle's weight and age. An increase would reflect the fact that bigger cars do more damage to roads and that their owners are best able to pay their fair share. According to one study, the average yearly income of Lexus LX 470 owners is $250,000.

3. Use most new revenue to improve and subsidize public transportation.

Studies show that 80 percent of households with incomes under $15,000 a year own no cars or one car, while almost 90 percent of households with income over $80,000 own at least two cars. Making public transportation more attractive would help those who need it most and could also encourage those most likely to drive to drive less.

4. Use some new revenue to help those most adversely affected by increased costs.

One cent of the increase should be used to set up a $50 per year tax credit for those with incomes below $30,000 - which would offset the tax increase for them. In addition, one cent should be targeted to such programs as the state Earned Income Tax Credit, transportation subsidies and childcare in recognition of the rising need for spending in these areas and the state's unwillingness to tap such sources as the income tax.

In New Jersey, "vehicles today get the next best thing to a free ride," the report concludes. "Through an increase in its gas tax and registration fees New Jersey could finance a first-rate public transportation system, reduce over-reliance on automobiles and expand benefits for people most in need while calling on those best able to pay to contribute more of their fair share."

TAX REFORM

WORK & WAGES

BUDGET & FISCAL POLICY

TRANSIT ISSUES

ECONOMIC DEVELOPMENT

VOTING & GOVT REFORM

© 2008 New Jersey Policy Perspective