To hike the gas tax on not to hike the gas tax, that is the question

By Dr. Murray Sabrin

The Transportation Trust Fund (TTF) will essentially be out of money for new projects after June 30 if the "gas tax" is not raised. The reason gas tax is in quotes is quite simple, the gas tax is a user fee. Motorists pay a fixed fee per gallon to use the roads and bridges.  The gas tax is an efficient way for the government to collect the funds necessary to maintain a crucial component of a civilized society and growing economy-- roads and bridges are indispensable to provide the means by which goods go from factories to distribution centers to retailers. And now with e-commerce taking a greater share of retail sales the roads become even more important as the Postal Service, Fedex, UPS have seen their business increase because of changing consumer buying patterns.

In addition, maintaining this crucial component of our infrastructure makes New Jersey a more livable place for not only residents but also tourists.   The miserable conditions of our roads, highways, and bridges has an impact on both commuters and tourism.

There is no need to rehash the failure of both Republicans and Democrats in Trenton to keep the transportation trust fund solvent. Suffice it to say that if legislators and governors from both sides of the aisle since 1988-- when the gas tax was last raised – had increased the gasoline tax by only a penny per year, we would not be in this predicament today. So much for the "farsightedness" of legislators who have been sent to Trenton to serve the people.

Instead, the political jockeying continues as both Gov. Christie and the Democratic controlled legislature have refused to do what is necessary to not only keep the Transportation Trust Fund solvent with cash to maintain the state’s roads, highways, bridges and other assets but institute needed reforms that would make New Jersey's economy more robust and vibrant in the years ahead.

Several proposals have been put forward to provide the cash needed for road, bridge, and rail projects throughout the state.  Democrat Senator Paul Sarlo, chairman of the budget committee, has backed Republican Steve Oroho on a proposal that increases the gas tax while reducing several other taxes such as the estate tax, the tax on retirement and pension income, and adding a charitable contribution deduction for individuals.  These are proposals that every Republican should embrace because it means New Jerseyans would have a substantial tax cut that would be offset by a minuscule increase in the so-called gas tax.

According to one analysis the average New Jersey family would save at least $1200 per year if these tax cuts were enacted.

What would a gas tax increase of say $.10 per gallon cost the average motorist? Well, if you drive 15,000 miles per year and your car gets 30 miles per gallon; you would purchase 500 gallons of gasoline per year, costing you $50 a year extra in gasoline purchases, or about a dollar per week.  Look at the trade-off, a $50 increase in gas costs as opposed to a $1200 a year tax cut. Who would not want to take that deal? The gas tax could then be increased a few pennies each year for five years to keep the TTF humming to make New Jersey’s roads, bridges and other vital transportation assets in tip top shape.

But more is needed to get a bigger bang for our gas tax bucks.  According to one report, which has been disputed by a Rutgers University study,  the cost of repairing and constructing highways in New Jersey is much greater than the national average.  Whether it's the case or not, it wouldn't hurt for the Department of Transportation to open up the bidding process to allow out-of-state contractors who work on roads, highways, and bridges throughout the country to come into the state and help reduce construction costs for the people of New Jersey.   This is only common sense. 

Life is about trade-offs and in this case the trade-off is compelling, a slightly higher gas tax for substantial tax relief.  Gov. Christie and the legislative leadership should show some guts and get New Jersey on the right track—smooth roads, safe bridges and much needed tax relief for the beleaguered taxpayers of New Jersey. 

Murray Sabrin is professor of finance at Ramapo College and former Libertarian gubernatorial nominee and Republican U.S. Senate candidate.