Assembly panel advances bill to hike gas tax after hearing mixed reception

An Assembly panel in a party-line vote Thursday approved a bill that would increase New Jersey’s gas taxes and impose an annual fee on electric vehicle registrations to continue funding the state’s transportation trust fund.

The bill would raise the gas taxes’ $2 billion revenue target by $366 million over five years, with the first $32 million increase set to hit on Jan. 1, and it would levy an annual $250 fee on zero-emission vehicle registrations that would rise to $290 by July 2028.

The legislation won plaudits from construction labor unions, some business groups, and local governments, but met with resistance from car dealers and environmentalists who worry it would make electric cars less affordable. Other critics cautioned that improvements to the transportation trust fund’s health over the past eight years make a gas tax hike unnecessary.

The bill aims to address how electric vehicles that do not directly contribute to the trust fund through gas or sales taxes can help pay for the infrastructure they use and ensure the trust fund can continue making payments on existing debt and issuing bonds to fund infrastructure projects.

Labor groups who back the proposal in large numbers lauded it for its economic impact, saying it would support the creation of good-paying union jobs and support New Jersey’s broader economy by ensuring pockmarked roads and bridges do not snarl traffic.

“Without a trust fund making consistent investments, none of us could get to our jobs, our children’s schools, the shore, any of our state parks,” said Steven Gardner, director of the New Jersey Laborers Union. “New Jersey’s entire economy is fully dependent on having a first-class transportation network.”

Business groups are more divided on the bill. The New Jersey Chamber of Commerce backs the bill without qualification, saying a reauthorization of the trust fund that would clear it to bond more than $8 billion for infrastructure projects over the next five years would create more than 20,000 jobs and make New Jersey more attractive to businesses.

The New Jersey Business and Industry Association and the Commerce and Industry Association of New Jersey support the trust fund reauthorization — as virtually every witness did Thursday — but stopped short of a full endorsement over concerns about costs the bill would pass onto consumers and their members.

“Anything we do to invest in our transportation infrastructure is important for our economy, but it’s also important to have a plan because, as you may have heard before, New Jersey has an affordability problem as well as needing to focus and prioritize transportation,” said Chris Emigholz, vice president of government affairs for the NJBIA.

Environmental groups took issue with the proposed electric vehicle registration fee, cautioning it and Gov. Phil Murphy’s proposal to phase out a sales tax exemption for electric vehicles would lead to sticker shock. It makes little sense that electric vehicle drivers could pay more than hybrid owners and some others as the state moves forward with a plan to phase out new gas vehicle sales by 2035, they said.

Because registrations for new cars last up to four years, the fee could add more than $1,000 in upfront costs, which would increase by thousands more once sales taxes on electric vehicles phase up from zero to the state’s full 6.625% rate.

“The economics don’t really support a $250 fee, and it would be punitive on EVs to put in place a fee that high,” said Eve Gabel-Frank of electric vehicle coalition ChargEVC. “Just for comparison, an average Prius Prime … which is something that someone who’s thinking of getting an EV might buy, they pay about $97 a year in gas tax.”

Witnesses representing convenience stores, gas stations, and fuel wholesalers questioned whether a gas tax increase is necessary, noting the trust fund had much recovered from 2016, when a legislative standoff over funding led to a months-long shutdown of infrastructure projects across the state.

They also questioned whether lawmakers are being truthful about the bill’s impact on the gas tax. Some legislators have said the bill would raise the gas tax by 1.9 cents annually for five years, but the bill does not set rates, it sets revenue targets — meaning the actual increases could be higher or lower depending on factors like fuel use and efficiency, among others.

“It would be a steady 1.9 a year if we sold the same amount of gallons of fuel every year for the next five years, but what we’ve seen over the years is a steady decline in motor fuel, mostly because of the fact that new cars are much more efficient in their fuel usage,” said Eric Blomgren, chief administrator of the NJ Gasoline, C-Store, Automotive Association.

Republicans, who are drafting their own pitch to fill the transportation trust fund, suggested lawmakers should find a solution that would avoid a baked-in tax hike.

“We can do this without going back to the till,” said Assemblyman Christian Barranco (R-Morris)

Anjuli Ramos-Busot, chapter director of the New Jersey Sierra Club, urged the committee to find a way for electric vehicle owners to pay into the trust fund based on how much they drive, perhaps through charging fees. Others cautioned that a registration fee would not be paid by out-of-state electric vehicle owners.

Assemblyman Clint Calabrese (D-Bergen), the bill’s prime sponsor and the transportation committee’s chair, said he hopes the fee would not dissuade would-be electric vehicle owners from buying them, but said the state must find a way for these vehicles to fund roadwork, especially as they grow more common.

“We have to make this fair,” he said. “The whole point is making this fair across the board for people who pay at the pump and those who now have to purchase an EV.”

The bill cleared Thursday’s committee without any amendments, but Calabrese said he could not guarantee the bill would remain unchanged as it advanced. The Senate Budget and Appropriations Committee is set to weigh an identical bill on Monday.