STATE – According to a report released earlier this month, New Jersey is leaving more than $500 million on the table each year by not increasing its gas tax rates to keep pace with increases in transportation construction costs.
The report, “Building a Better Gas Tax” from the Institute on Taxation and Economic Policy, says that the effective gas tax rate has fallen by 40 percent over the last 20 years, since New Jersey hasn’t increased the gas tax since 1988.
New Jersey charges 10.5 cents per gallon of gasoline, and 13.5 cents per gallon of diesel fuel. Including the federal gas taxes, New Jersey’s 32.9 cents per gallon rate is the third lowest overall gas tax in the country. The diesel rate, at 41.9 cents per gallon, is the sixth lowest overall rate.
“Building a Better Gas Tax” shows that the average state has not increased its gas tax rate in over a decade, and 14 states have gone 20 years or longer without an increase. But while state gas taxes remain flat, the cost of paving roads and building bridges inevitably rises almost every year, often at a rate higher than general inflation. “It’s basic math,” said Carl Davis, senior analyst at ITEP and author of the study. “The road repairs you could buy in 1990 with 20 cents, for example, are going to cost 34 cents today. But we still see some states collecting the same flat 20 cent tax that they did back in 1990. That’s the definition of unsustainable.”
“Unfortunately, many politicians won’t consider touching the gas tax,” said Davis. “They are raising sales taxes, fees on vehicles, tolls on roads, even looting education funds, all to make up for the stagnant gas tax. But they can’t bring themselves to modernize the biggest source of transportation revenue that’s actually under their control. It makes no sense.”
“Building a Better Gas Tax” offers three specific policy recommendations for modernizing state gas taxes:
1. Increase gas tax rates to (at least) reverse their long term declines. The appropriate contemporary rate for each state will depend on transportation funding needs as determined by lawmakers and the public.
2. Restructure state gas taxes so that their rates rise automatically alongside the inevitable growth in the cost of transportation construction projects. If every state had restructured the last time it raised its gas tax, total state gas tax revenues would be over $10 billion higher per year.
3. Create or enhance targeted tax credits for low income families to offset the impact of gas tax reform
The full study is available at http://www.itepnet.org/bettergastax/
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