Building A Better Gas Tax

A new report by the Institute on Taxation and Economic Policy (ITEP) reveals that New Jersey hasn’t raised the gas tax in 20 years, while roadway construction costs have skyrocketed. Effectively reducing the purchasing power of our taxes, this lost revenue is significant – “annual losses in New Jersey are over $500 million.”

According to the report, “taxes and fees paid by drivers (the most significant of which is the gas tax) make up a smaller share of total highway funding than at any point since the creation of the Interstate Highway System in 1957.”

In our previous post, Who Pays for Our Roads, we looked at the components of New Jersey’s state roadway funding (consumer gas taxes, oil industry taxes and general sales tax), and noted that property taxes fund local and county roads. We also reported that New Jersey’s gas taxes only pay the interest on past roadway improvements, and improvements are 99% paid with borrowed money.

Adjusted for roadway construction costs, the ITEP report notes that New Jersey’s gas and diesel taxes have lost 40% of their purchasing power since they were last adjusted, a loss totaling $505million annually.

The report recommends solutions: “The best structural reform possible is to link, or ‘index,’ the gas tax rate to some official measure of transportation construction cost growth.” An increase of 11.8 cents per gallon of diesel and 9.8 cents per gallon of gasoline would restore purchasing parity.

How about it? We’ve seen NJTransit fares increase 25% – it now costs almost $30 for a round trip train ticket between Princeton Junction and New York. We’ve seen toll increases on the turnpike, tunnels and bridges, and more are coming. When the Scudder Falls bridge on I-95 gets expanded to 6 lanes, a toll will be charged for the first time. Our transportation network is very expensive, but so far we’ve been unwilling to pay to maintain it, preferring to borrow instead – it’s not a sustainable solution. What do you think?

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