The following information was provided by the New Jersey Senate.
Sens. Paul Sarlo (D-Bergen) and Steve Oroho (R-Sussex) announced Friday that they had reached a bipartisan agreement to fund a 10-year, $20 billion Transportation Trust Fund. Part of the agreement also included a series of tax cuts.
The Sarlo-Oroho plan calls for a 7 percent Petroleum Products Gross Receipts Tax, a 10-cent per gallon PPGRT tax on motor fuel, and a 3-cent pergallon PPGRT diesel surcharge, all imposed at the wholesale level. If oil companies passed the full cost of the PPGRT tax on to motorists, the gas tax increase would be 23 cents a gallon.
All motor fuel taxes will be dedicated solely to the Transportation Trust Fund under a constitutional amendment already scheduled to go on the ballot in November.
A second bill authorizes a 10-year, $20 billion Transportation Trust Fund to replace the current five-year TTF that expires June 30 and runs out of money for new projects by April.
DRAFT PLAN FOR TRANSPORTATION TRUST FUND AND TAX CUTS
- $2 billion a year Transportation Trust Fund authorizing spending of $20 billion over 10 years, with all revenue from motor fuels taxes constitutionally dedicated and unused funding rolled over into TTF Capital Fund surplus
- TTF Funding: 23 cents in motor fuels taxes added to existing 14.5-cent gas tax
- Existing 10.5-cent per gallon tax on motor fuel, 13.5-cent tax on diesel, and 4-cent Petroleum Products Gross Receipts Tax on motor fuel and non-motor fuel use remain dedicated to payoff of existing debt.
- Existing $200 million in constitutionally dedicated sales tax revenue remains dedicated to payoff of existing debt (but additional $346.2 million in sales tax revenue the Governor used in FY17 budget to plug hole in TTF is shifted back to General Fund to pay for tax cuts)
- New 7 percent PPGRT tax on motor fuel (equivalent to 12-cent tax hike on regular gas as of May 1 prices), with floor set at price level when new tax goes into effect. Future price increases projected to just about offset future decline in motor fuel consumption over next decade due to fuel efficiency; while PPGRT^ tax rate will go up, consumers will end up paying about the same amount.
- Additional 10-cent per gallon Petroleum Products Gross Receipts Tax on regular motor fuel and 14-cent PPGRT on diesel fuel.
- New 7 percent PPGRT tax on jet fuel (aviation kerosene) to replace current tax limited to taxiing and takeoffs, and 7 percent PPGRT tax on non-motor fuel use represents increase from current 2.3 percent (home heating oil still exempted).
- Pilot Vehicular Mileage Tax on electric, hydrogen-powered and other non-gas powered vehicles to kick in one year after passage based on Oregon-California model, with revenue dedicated to TTF projects that reduce emissions such as mass transit or congestion reduction initiatives. Drivers and businesses can choose straight $150 user fee for individuals or $300 for businesses paid with registration renewal.
- Increase Earned Income Tax Credit from 30 percent of federal credit to 35 percent of federal credit effective for 2016 tax year to offset PPGRT motor fuel tax increase for those earning up to $45,000.
- Phase out estate tax, starting with increase from $675,000 threshold to exemption on first $1 million effective December 31, 2016, scaling up to full repeal of estate tax effective December 31, 2019, following the schedule set in the original Sarlo-Oroho bill.
- Increase exemption for retirement income for those earning $100,000 or less from current $20,000 for couples/$10,000 for individuals to $40,000/$20,000 in the 2017 tax year, ramping up to $100,000/$50,000 for the 2020 tax year.
- Establish income tax deduction for contributions to New Jersey charities limited specifically to charities engaged directly in meeting the social services needs of the most vulnerable, such as food banks, Catholic Charities, ARC, United Way, homeless shelters and Meals on Wheels. Eligible charities would be developed from NJ State Employees Charitable Campaign list, which has been properly vetted since 1985 and has strict standards. Deduction would be phased in over four tax years from 2017 to 2020.
- Establish income tax deduction of all gas taxes paid by those for whom gas tax exceeds 1 percent of income. Consumer can save credit card receipts or use standard multiplier based on odometer readings. Mileage reimbursed by employer is not eligible, nor is gas tax paid for commercial vehicles.
- Tax cuts are offset by $346 million in reallocated sales tax revenue (over and above the $200 million constitutional dedication) that Administration raided to keep TTF solvent in absence of promised PAYGO funding, plus $57 million to $75 million in additional income, sales and payroll tax revenue generated by increased TTF spending and tax cuts. Net to budget is break-even until FY20, 110 million loss in FY21 and $294 million loss in FY22, but that does not include any projection of additional income or sales taxes generated by wealthy taxpayers or seniors deciding to stay in New Jersey because of tax policy changes.