It’s finally official. New Jersey is going to raise the gas tax 23 cents a gallon. We’re gonna see it like, next week or something. I know a guy who used to say “BOHICA” on the radio about the state all the time. He was right. I need to break it down, though. There’s a lot to unpack.
The tax is going up. But it’s not really 23 cents a gallon. What they’ve actually done is tacked on an additional 12.5% tax per gallon, and estimated the gallon of gas at $1.84; this is what they call “spin”. Ostensibly it’s to sink entirely into the Transportation Trust Fund, because they’re kind of out of money at the moment. Or not. But there’s a few things they’re saying we’re going to get in return: they’re gonna cut our taxes! Let’s check it out, from that link:
- Sales Tax Cut: On January 1, 2017, the sales tax will go from 7% to 6.875%. The following year on January 1, 2018, , the sales tax will go from 6.875% to 6.625%. A .375% decrease in the sales tax is the first statewide tax cut that has been given in New Jersey since 1994.
- Tax Savings for the Working Poor: Increase the Earned Income Tax Credit for the working poor to 35 percent of the federal benefit amount beginning in Tax Year 2016.
- Tax Savings for Retirees: Increase the New Jersey gross income tax exclusion on pension and retirement income over four years to $100,000 for joint filers, $75,000 for individuals and $50,000 for married/filing separately.
- Eliminate the Estate Tax: Phase out the estate tax over the next 15 months, replacing the current $675,000 threshold with a $2 million exclusion after January 1, 2017 and eliminating the estate tax altogether as of January 1, 2018.
- Tax Savings for Veterans: Provide a personal exemption on state income taxes for all New Jersey veterans honorably discharged from active service in the military or the National Guard.
So, uh. We’re going to guess wildly at the amount we’ll get from the gas tax increase, here. Because the state’s guess is $2 billion a year. Who the hell knows? But let’s be sure what we’re getting here, something aimed at nearly everyone, but mostly the working folks who have to drive to work. Estimates are $170 more a year, on average (from the AAA) but that’s potentially variable. Again, we’re assuming $1.84 a gallon. Bear in mind we pay a flat 14.5 cent per gallon tax already. I just looked at aCar on my phone. I paid $1.959 a gallon; removing 14.5 cents makes it $1.81 but all articles I’ve read refer to the new tax being tacked on after the full cost of the gas. Regardless, we’ll start with a baseline of $2.189 a gallon. 23 more cents in my average 10 gallon fillup is $2.30, I fill up maybe once every two weeks, so that’s $4.60 a month more…pencils out, $55.20, right? Hooray.
Estate Tax elimination, hooray! I…hey, uh. How many…estates really get…hit with this? The baseline is $675,000 in assets. In 2014, 120 estates were over $5 million, and paid 38.4% of the estate taxes collected. Just over 1400 estates between $675K and $1 million were about 9%. That leaves people with between $1-5 million estates with the bulk.
As someone whose estate will very likely never reach $500K even with a house included this estate tax cut isn’t for me. Or you. Or my parents. We’ll most likely hear “oh, but the inheritance tax,” but bear in mind the following:
- The state inheritance tax is waived for spouses, parents, grandparents, children, stepchildren and grandchildren of the deceased (Class “A”)
- Siblings and children-in-law (childrens’ spouses) are exempt up to $25K, 11% to $1 million, with a stepladder increase max at 16% over $1.7M
- Everybody else gets 15% up to $700K and 16% over that.
- Charitable donations are tax free, as are state pensions, life insurance annuities, and federal and military retirement funds.
- The Fed excludes the first $5.45 million, so there’s that. 0.2% of estates pay the federal estate tax.
Thanks to nolo.com for that info. This is not going to significantly affect the little folks. Or even the medium folks.
So here’s the thing: the state Office of Legislative Services says this will cost us $550 million a year in the state budget. A decrease in the state sales tax will cost more money, too. So there’s going to be more budget shortfalls, most likely.
This is going to be a hit that will need to be absorbed, and if I’m wrong about this and the following statements then great. Here we go:
- State education funding to K-12 and higher ed will decrease. This will mean your favorite, property tax increases locally!
- Uh oh. We have a 2% cap now. So maybe they won’t go up quickly, so good! But we won’t be able to fund our schools. That’s bad.
- The funding issue will make for more attacks on teachers’ salaries. Hooray. Demonization of education continues!
- State employee pension funding will be absolutely jettisoned at nearly any cost.
- Welp, I’m boned. Unless I get out of the pension system sometime soon.
- State employee health costs will go up
- A general boning will take place budgetarily, and taxes will have to increase again. Like the sales tax. Or they won’t lower them at all. Because we can’t afford it
I’m not going to argue vets getting tax savings, or EITCs, or retiree tax savings. That last one could actually keep people in the state, exempting the first $100K in retirement. Who knows?
I’m still pretty sure of one thing, though.