Gov. Murphy signs gas tax hike, electric vehicle fee into law

Gov. Phil Murphy signed a reauthorization of the state’s transportation trust fund Tuesday that will bump up the state’s gas tax and levy a new registration fee on electric vehicles.

The bill, which passed both chambers in near party-line votes, will raise revenue targets for New Jersey’s gas taxes by roughly 18% over five years, an increase lawmakers have said would add roughly 2 cents to the state’s fuel levies annually.

“America depends on the strength of New Jersey’s transportation system,” Murphy said at a bill signing ceremony in Aberdeen. “If our infrastructure falls behind, our entire economy falls behind, and worst of all, our families would pay the highest price in the forms of costly delays and missed opportunities.”

New Jersey’s taxes on gasoline and diesel adjust automatically each year based on whether they hit their $2 billion revenue target, rising if they fall short and falling if there’s a surplus. The bill Murphy signed would raise that target to roughly $2.37 billion by July 2028.

The bill does not make explicit changes to gas tax rates, and because the taxes adjust to meet revenue targets, lawmakers’ predictions about the legislation’s effect on gas tax rates could over or understate the increase.

As the bill wound its way through the Legislature, advocates for gas stations and fuel wholesalers warned the increase would likely be larger, since fuel consumption generally falls over time — and may fall further as electric vehicles grow more popular. Business groups praised the measure as a needed salve for New Jersey’s economy.

“Infrastructure is the foundation of our economy,” said Mike Egenton, executive vice president of government relations for the New Jersey Chamber of Commerce.

The legislation also creates an annual registration fee for electric vehicles that starts at $250 on July 1 and then rises by $10 each year before capping out at $290 in July 2028.

The new fee is a bid to have electric vehicle owners pay into the transportation trust fund, which pays for road, rail, and bridge work throughout the state. The fund is filled by collections from New Jersey’s gas taxes and at least $200 million of constitutionally dedicated sales tax revenue each year.

Because fully electric vehicles do not burn gasoline, they do not currently pay into the fund. Environmental advocates have warned the fee — which could top $1,000 for new vehicle purchases that come with registrations lasting up to four years — and a separate plan to phase out a sales tax exemption on such cars would impede state electrification efforts by making zero-emission vehicles less affordable.

New Jersey has adopted rules that would phase out the sale of new gas-burning cars by 2035.

The nonpartisan Office of Legislative Services estimates the fee would bring in roughly $61.3 million in the fiscal year that begins July 1, rising to $207.4 million by fiscal year 2029, due mostly to a nearly three-fold increase in electric vehicle registrations the office projects.

The law will allow the transportation trust fund to borrow an additional $3.6 billion to fund transportation projects through June 2029 and extend the fund’s existing bond capacity, of which roughly $5.2 billion remains untapped.

It would also raise annual spending caps imposed on the trust fund from $1.6 billion to $2 billion starting July 1.

The law will add roughly $60 million in additional spending capacity starting in two years that would be equally split between transportation projects undertaken by counties, municipalities, the Department of Transportation, and NJ Transit. Those funds would cap out at $185 million in fiscal year 2029.

“It is a commitment to 9.3 million New Jerseyans and tens of thousands of businesses that we value transportation,” said Assembly Speaker Craig Coughlin (D-Middlesex).