New Jersey is raising gas taxes and a new electric vehicle fee to pay for road repairs, infrastructure

Buckle up, New Jersey: Driving in the Garden State is about to get incrementally more expensive.

Starting in July, drivers in New Jersey will see an annual increase in the tax on gasoline — estimated at around 2 cents per gallon — over the next five years. Electric vehicle owners, meanwhile, will see an annual road maintenance fee, beginning at $250.

It’s all part of a move to raise revenues for the state Transportation Trust Fund (TTF), which finances major New Jersey infrastructure projects, from state and interstate highways to bridges, transit construction, railroads, and runways, “and even those damn potholes,” Gov. Phil Murphy said Tuesday before signing legislation reauthorizing the fund for five more years.

“America depends on the strength of New Jersey’s transportation system,” Murphy said, noting that the state sits “at the heart” of the Northeast Corridor, where “roughly 20% of our nation’s GDP flows through our entire region’s roads, tunnels, bridges and train tracks.”

“If our infrastructure falls behind, our entire economy falls behind, and worst of all, our families would pay the highest price in the form of costly delays and missed opportunities,” Murphy said. The reauthorization, the governor said, would “rebuild and maintain our entire transportation system,” create thousands of union jobs, and help to offset costs of infrastructure repairs for municipalities.

The renewal of the TTF adjusts the state’s gas tax formula in order to raise yearly revenue targets from $2 billion to $2.37 billion by July 2028, via an estimated annual 1.9-cent increase per gallon in gas tax.

The electrical vehicle fee — a first in New Jersey — would charge drivers of non-gasoline-burning cars $250 in July, and increase that payment by $10 each year until reaching $290 in 2028. More than 30 other states have implemented similar registration fees on electric vehicle owners to fund infrastructure improvements. Murphy previously announced plans to require all new cars and light-duty trucks in New Jersey to be zero-emission by 2035.

Murphy and other proponents of the fund’s renewal noted that it will provide for an estimated $2.3 billion in state aid to counties and municipalities for road improvements — fees they say would typically be shouldered by local taxpayers via property tax.

Barrington Mayor Kyle Hanson Wednesday applauded the renewal of the transportation fund, noting that since 2018, his South Jersey borough has received more than $1.6 million in grant funding through the state’s transportation department for roadway preservation and improvement projects — money he said “would not have been possible” without the fund.

“The TTF is a win for our local municipalities and Camden County as a whole, because renewing the TTF means that we won’t need to raise our municipal or county taxes in order to pay for those transportation projects,” Hanson said. “Ideally, with the renewal of the TTF, we will continue to be awarded those grant funds to keep the cost to our taxpayers as low as possible.”

The reauthorized fund will also raise money for capital projects for the transportation department and the struggling New Jersey Transit, which has proposed a 15% fare hike as budget deficits loom.

Earlier this month, Republican critics of the Democratic legislation put forth an unsuccessful counterproposal, which dropped the gas tax increase while imposing a flat $300 registration fee on electric vehicles and constitutionally dedicating sales tax of the vehicles to the fund, decrying the impact a gas tax increase may have on residents.

The New Jersey Transportation Trust Fund was created in 1984, intended to help pay for construction and repair to the state’s roads, bridges, and mass transit through a per-gallon gas tax.

But over decades, rather than paying for the completion of projects, the state instead heavily relied on borrowing money from the fund, with politicians reticent to raise taxes as New Jersey maintained one of the lowest gas tax rates in the country at 14.5 cents per gallon.

By 2016, the depleted transportation fund had reached a crisis point, with construction projects put on hold and laborers out of work, as then-Gov. Chris Christie and state lawmakers couldn’t agree on how to replenish it.

After months at an impasse, Christie in October 2016 reauthorized the TTF for eight years, raising the state’s gas tax by 23 cents per gallon.

After that, state law required the tax rate to be adjusted each October to ensure that it generated around $2 billion each year to fund infrastructure improvements. Currently, drivers in the Garden State pay around 42.3 cents per gallon in gas tax — the seventh-highest in the nation, according to the Tax Foundation. (Pennsylvania drivers pay the third-highest gas tax in the country at 62.2 cents per gallon, according to the foundation.)

The new law signed by Murphy Tuesday will delay any additional increases in the gasoline and diesel fuel tax this year — pushing any further adjustment of gas tax rates in Jersey from October to January 2025.