Increasing New Jersey’s Gas Tax to Fix Infrastructure is No Longer Feasible
Until recently, New Jersey had the second lowest gasoline taxes in the country behind Alaska (12.25 cents-per-gallon). Unfortunately, that changed in 2016, when former Governor Chris Christie signed a legislative parting gift to enact the first gas-tax increase in nearly three decades to support the state’s anemic Transportation Trust Fund.
While the double-digit increase shocked residents of the most densely populated state in the nation, it came as no surprise that the increased revenue was slated to fund an eight-year, $16 billion program to pave roads, repair bridges and improve commuter rail. After all, the American Society of Civil Engineers (ASCE) gave New Jersey a D-plus infrastructure rating in 2016.
Now, adding insult to injury, Governor Phil Murphy, a first-term Democratic governor, has announced that the gas tax will climb another 4.3 cents per gallon to a whopping 41.4 cents. This elevates New Jersey, which boasts some of the nation’s most-traveled and least-repaired highways, into the number-eight spot for states with the highest gas taxes.
Rather than increasing gasoline taxes even further, policymakers have begun to explore the idea of financing highway expenditures by charging drivers and truckers for the amount they drive in the form of a tax on Vehicle Miles Traveled (VMT). The VMT tax would solve some of the problems inherent to the gas tax. Electric vehicles, for instance, don’t burn gasoline, but still cause potholes and traffic just like everyone else. VMT fees ensure these drivers pay something for the roads, regardless of what powers their vehicle.
Better yet, VMT taxes can vary by vehicle classification. Heavy trucks, which damage roads most, can pay more per mile to use New Jersey roads than personal cars, which don’t add much to maintenance costs. This encourages the use of lighter vehicles, and that will decrease the state’s infrastructure costs over time.
VMT fees are a transparent way to pay for the streets and roads people use every day. Everyone pays based on how much driving they do. The user fee is transparent, and policymakers can change the rate should citizens not be satisfied with the state’s road quality.
As with gas taxes, policymakers must resist the urge to use road funds for transit projects. Instead, transit should be paid for out of general fund spending, similar to school buildings and other social infrastructure. If money from VMT fees is used for non-road projects, drivers would have little reason to support raising the per mile rate. The same troublesome dynamic we see with inflexible gas tax rates today would manifest in the VMT tax and destroy much of its value as an improved roadway user fee.
Vehicle-miles-traveled fees could prove to be a road funding mechanism that’s less politically toxic than changing the gas tax. VMT taxes are simple. Miles times tax rate.
Transparent road taxes would make clear to citizens the cost of the infrastructure they use every day. Plus, these fees are universal. They ensure that all users pay, and immunize the state’s coffers from changes in engine technology as more people buy electric vehicles. This combination of transparency and universality could make VMT taxes a winning path forward for New Jersey drivers.
Nicolas John is the Northeast Region Manager at the R Street Institute. Nick Zaiac is a Commercial Freedom Fellow at the R Street Institute.