FINALLY, Governor Christie, Senate President Sweeney and Assembly Speaker Prieto announced yesterday an agreement for funding the Transportation Trust Fund (TTF). It includes an unpopular 23 cent increase per gallon in the gas tax. The long delay, however, was over the proposed tax policy changes. As the legislature would lack the votes to muster a veto override and Christie has long insisted on “counterbalancing” tax cuts, it took forever for the troika to reach an accord. Hence, we will pay a higher gas tax but get some reductions in other taxes..
Whether it took the terrible train accident in Hoboken to nudged the troika toward a resolution we may never know. Nonetheless, work on NJ transit, roads, bridges, and tunnels will resume and people will be back at work. We will all benefit from a total investment of over $3 billion ($2 billion from the state plus matching federal funds) in our infrastructure for each of the next eight years.
The increased gas tax income will constitutionally be dedicated to the Transportation Trust Fund, subject to the likely voter approval in the November ballot question. The decrease in our budget’s general fund monies from the tax policy changes will likely be over $1 billion a year, and it’s unclear from where the money will come.
- The sales tax cut on January 1, 2017 will go from 7% to 6.875% and on January 1, 2018 to 6.625% – a total decrease of .375%.
- Earned income tax credit for the working poor will increase from 25% to 35% beginning in the tax year 2016.
- Gross Income Tax Exclusion on pension and retirement income over four years will increase to $100,000 for joint filers, $75,000 for individuals, and $50,000 for married/filing separately.
- The estate tax will be phased out over the next 15 months replacing the current $675,000 threshold with a $2 million exclusion after January 1, 2017 and eliminating the tax altogether as of January 1, 2018.
- A personal exemption will be provided on state income tax for all NJ veterans honorably discharged from active duty in the military or national guard.
The increase in the EIT will benefit the working poor, the tax exemption will help veterans, and the increased tax exclusion will be good for retirees. The sales tax cut will benefit everyone but even more so those who are rich. Phasing out the real estate tax is a gift to the wealthy.
NJ Policy Perspective VP Jon Whiten said, “While it is absolutely essential that New Jersey invest in its transportation infrastructure, that investment should not be held hostage to some warped idea of so-called ‘tax fairness’ that will cost the state well over $1 billion a year. This is, quite simply, the wrong path forward for New Jersey.”
In spite of endless disagreements, a long delay, and an imperfect solution, the Troika members are already congratulating themselves even before we have seen all the details in the plan. (Christie’s press release does not mention, for example, when the gas tax increase will take effect.) There are more than enough Democrats in the legislature to pass the needed bill, but even some Democrats may oppose it because of the burden it places on our budget.
After driving over too many potholes, detouring around closed bridges and worrying about the safety of our buses and trains, we can join with Willie Nelson or Johnny Cash and sing about one of America’s favorite pastimes:
“On the road again
Just can’t wait to get on the road again.”