Fuel Tax Increase/EV Fee Officially Signed into Law
As expected, Governor Murphy signed into law the bill to authorize and fund the TTF with higher fuel taxes. The rate increases will be the same for gasoline and diesel motor fuel. Under the language of the bill, there should be no change in tax rate until January 1st. The advocates have claimed the increase will be 1.9¢ a gallon, but we expect it to be closer to 3.5¢ a gallon. There will be NO floor stocks tax on existing gallons in the ground when the rates are increased, so have no fear of that burden.
Though we certainly opposed this increase as being too high, now that the issue is over its worth talking about how much worse it could have been. If all the bill did was adjust the target revenue collection for inflation since 2016, we would be looking at a 13¢ a gallon increase starting immediately. Instead, it'll take five years to reach a rate increase that will likely be smaller than that. It means in 2029 the revenue target will be $2.37 billion, even though the 2016 revenue target of $1.95 billion is actually worth $2.52 billion right now, and of course 5 more years of inflation will erode that further. Such a sharp and immediate tax increase would have completely eliminated our tax advantage over Pennsylvania and led to fewer gallons sold, forcing the rate up higher such that we could have been looking at something more like an 18¢ a gallon increase before long.
Public opposition to this funding proposal was also much smaller than it was in 2016, when the issue was publicly debated for months. In hindsight, they probably could have gotten away with a larger increase. There was also a real chance that they might have resurrected the idea of extending the sales tax to motor fuels, which would have been a huge regulatory burden for every station owner. At current prices that would be about 22¢ a gallon more for regular gas, but would have let them say they hadn't raised any existing tax, just closed a 'loophole'.
There was also serious pushback against closing the current subsidy that lets EV owners get away with using the roads and not paying to maintain them (even though EVs are about 30% heavier than gas-powered vehicles). 32 states have a similar kind of registration fee as what NJ now has, though our rate of $250 a year (increasing gradually to $290) is the highest in the nation, and actually higher than what many motorists pay in total gas taxes per year. Environmentalists were pushing to lower the rate to as little as $75 a year.
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