\You’ll be hit with a new tax increase soon if N.J. leaders get their way. (2024)

New Jersey is poised to gradually increase its tax on gasoline by nearly 10 cents a gallon and charge a fee on electric vehicles over the next five years, under a new plan pushed by state leaders to keep state infrastructure funding from falling off a cliff.

The gas tax would go up roughly 1.9 cents per gallon annually over the next five years under the deal forged by Democratic Gov. Phil Murphy and top Democratic state lawmakers, administration and legislative sources confirmed to NJ Advance Media on Tuesday.

It would also impose a fee ranging from $250 to $290 a year on electric vehicles over that period.

The plan, which needs legislative approval, would generate $2 billion or more a year to replenish the state’s Transportation Trust Fund, which helps pay for highway, road, and other infrastructure projects throughout New Jersey.

Lawmakers are set to begin hearing the bill (A4011) in the coming days. It will be considered by the state Assembly Transportation and Independent Authorities Committee on Thursday and then by a state Senate panel next week.

The hike would be on top of an annual formula the state uses each year to decide whether to increase the tax. Then-Gov. Chris Christie, a Republican, cut a deal with the Democratic-controlled state Legislature in 2016 for the gas tax to be adjusted each October to ensure it generates about $2 billion a year in revenue to support the TTF.

Currently, the state collects 42.3 cents for each gallon of gasoline sold here and 49.3 cents on every gallon of diesel — the seventh-highest rate in the nation. The rate rises or falls each year based on the formula outlined in the law.

But the fund needs to be reauthorized by the end of June, officials said. Otherwise, it will run out of money.

The higher gas tax and new electric car fee would take effect in July if approved by the Legislature and signed into law by Murphy.

The governor and legislative leaders, who negotiated the plan in recent weeks, see this as a relatively “modest” increase in a densely populated and heavily traveled state where infrastructure is critical, according to the sources, who spoke on the condition of anonymity to discuss the plan freely.

A pair of Democratic legislators from Bergen County, the state’s most populous county — who chair the state Senate and Assembly’s transportation committees — are main sponsors.

“The state’s infrastructure is the backbone of commerce and the economy in New Jersey. Our roads, bridges, tunnels and railways need to be repaired, maintained and improved,” said Sen. Paul Sarlo, also the Senate budget committee chair, in a statement. “Renewing the Trust Fund will address the state’s infrastructure needs, create jobs and fuel economic growth.”

Assemblyman Clinton Calabrese touted the increase as a victory for union workers and said the legislation would spare taxpayers the burden of raising money for transportation projects locally.

“By creating thousands of well-paying union jobs, we are investing in both immediate and long-term economic growth,” Calabrese said. “Furthermore, this legislation provides relief to property taxpayers by sparing municipal governments from the need to raise local property taxes to fund essential transportation improvements.”

Politico New Jersey was the first to report the plan Thursday.

Under the proposal, the New Jersey Transportation Trust Fund Authority would issue $8.8 billion dollars in bonds between July 2024 and June 2029. In 2022, the authority’s fund reported $20 billion in outstanding bonds.

The issued bonds would increase by an estimated $185 million for the 2027-2029 fiscal years. Within that time span, there would be a four-way division of those funds between municipal, county, NJ Transit, and state-level projects.

Meanwhile, electric vehicles would be charged a $250 fee in the first fiscal year. That would increase by $10 a year after that, capped at $290 by the end of the five-year period. In his state budget revealed last week, Murphy proposed eliminating a sales tax exemption on electric car sales.

Lawmakers justify the fee for electric vehicles, saying they contribute to wear and tear on roads because they are heavier but don’t have to pay the gas tax. The batteries for the vehicles, which can weigh hundreds of pounds, account for that weight increase.

The question is whether the plan will pass the Legislature. This comes months after Democrats increased their control the governing body in an election that focused on affordability.

Sen. John Burzichelli, D-Gloucester, a former Assembly member who won a seat in the Senate in the fall, said it’s “too early to make a call as to where this would land.”

Republicans in the Senate, who have long criticized the Democratic party’s transparency in creating budget items, assailed its timing, saying they should have been privy to negotiations between the Murphy administration and Democratic lawmakers.

“We’re doing a thorough look now to figure out what the right policy is,” said Sen. Declan O’Scanlon, R-Monmouth, the party’s budget officer in the Senate. “But we should be doing all we can right now to avoid increasing taxes on the most heavily taxed people in the nation.”

The plan comes about a week after Murphy introduced a $55.9 billion state budget proposal for the fiscal year that begins in July — one that comes amid a flurry of transportation-related moves.

Murphy’s budget blueprint includes a few new taxes and fees to help cover spending, including a 2.5% tax on the state’s wealthiest businesses to help provide an annual funding source for NJ Transit.

That’s on top of a proposed a 15% fare hike for NJ Transit as the state’s rail and bus agency faces a budget shortfall.

At the same time, tolls for the New Jersey Turnpike and Garden State Parkway just increased 3%.

Plus, Murphy’s administration is phasing out a sales tax waiver for people buying new and used electric cars in the state.

NJ Advance Media staff writer Steven Rodas contributed to this report.

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Jelani Gibson may be reached at jgibson@njadvancemedia.com. Follow him on X at @jelanigibson1 and on LinkedIn.

Brent Johnson may be reached at bjohnson@njadvancemedia.com. Follow him on X at @johnsb01.