In New York and New Jersey, a tale of two gas taxes

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A gas pump. (Robert Couse-Baker)
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As New Jersey veers headlong into a debate over raising its gas tax, its neighbor, New York, has no intention of touching its own tax any time soon.

The two states are alike in demographics, geography and infrastructure woes. According to Forbes, New York boasts the highest state and local tax burden in the union, with New Jersey running a close second. Albany and Trenton also share dubious expertise on "creative" budgeting.

But the two states are at opposite ends of the spectrum when it comes to their gas tax. New York has one of the highest gas taxes in the country. New Jersey has one of the lowest. With gas prices at record lows thanks to the hydrofracturing boom, states are re-examining where they stand on the perilous tax. In New Jersey, there's reason to expect the gas tax will be raised within the next year or so. In New York, forget it.

One of the principle differences is emergent need. New York's road and bridge infrastructure is by no means in peak condition, but New Jersey's is considered much worse by industry and business experts.

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According to information published by the federal Department of Transportation, 6,775 of New York's 17,442 bridges, or roughly 39 percent, are "structurally deficient" or "functionally obsolete." New Jersey actually fares slightly better in this category. Only 2,334 of the state's 6,566 bridges, or 35.5 percent, are "structurally deficient" or "functionally obsolete."

Still New Jerseyans pay an average $601 annually in extra repairs due to driving on roads in need of fixing, according to the same DOT data. New Yorkers pay only $403 in extra costs, or 33 percent less than their Garden State neighbors.

In New Jersey, the sense of imminent doom is palpable.

"I would say that the roads are in noticeably worse shape [than in New York]," said Tom Wright, president of the Regional Plan Association.

The interests coalescing around a gas tax increase in New Jersey include Republicans and Democrats, environmentalists and business groups. The interests coalescing around one in New York include almost no one. Even environmentalists, who generally support efforts to curb fossil fuel use, don't want a piece of it.

Environmental groups see New York's gas tax as a divisive issue that could alienate consumers, said Travis Proulx, spokesman for Environmental Advocates of New York.

“The environmental community is not opposed to raising the gas tax,” he said. “The community is smart enough to not box itself into that taxing sort of message.”

The biggest difference between the two states, though, is infrastructure funding.

Former New Jersey governor Tom Kean Sr. created the state's Transportation Trust Fund in 1984, with a dedicated source of revenue in the 14.5 cent gas tax. The tax not only funded transportation projects, but acted as the security on which to bond for billions of dollars in capital financing.

The annual debt service alone costs the fund roughly $1.2 billion a year. The gas tax, which is comprised of a 10.5 cent tax at the pump and a four-cent petroleum gross receipts tax, takes in about $905 million a year. Just to pay off the existing debt, the state has to borrow about $300 million from its general fund. The tax hasn't been raised in nearly 30 years, and come July 1, the trust fund goes broke.

"Everybody knows you've got to get the Transportation Trust Fund funded again and the gas tax is the way to do it," Kean Sr. said in a recent interview.

New York has the opposite problem. The gas tax, which is roughly 45 cents a gallon, was also supposed to go to a dedicated fund for infrastructure. As is often the case in Albany, though, that money was raided for other purposes.

Less than a quarter, or 22 percent, of the $3.8 billion collected from the gas tax, as well as petroleum business tax and license fees, went to capital road projects, according to a February audit from state Comptroller Tom DiNapoli. The rest was swept into the state’s general fund, he found. In the last year, $1.6 billion went to snow and ice removal by the Department of Transportation and day-to-day expenses at the Department of Motor Vehicles, according to DiNapoli’s audit.

“Taxpayers have paid billions in taxes and fees into a fund that was created to keep our roads and bridges in good repair,” DiNapoli said in a statement. “Now, more than three-quarters of this money is siphoned off to pay for borrowing and operating costs of state agencies, leaving fewer dollars for improving our infrastructure.”

Surveys show that consumers are willing to have their gas taxes raised, if they are certain the money is being is devoted to its intended use, said AAA's Corlett. Raising the gas tax is already a tough sell, but it’s an impossible ask when so little of the money is going to roads, he said. Money started being diverted from the fund in the 1990s.

A recent poll in New Jersey found that there's not much support to raise the gas tax among voters. A majority of 935 New Jersey residents surveyed in a Rutgers-Eagleton poll — 54 percent — don’t think the state spends enough on road and bridge maintenance. But by a margin of 57 percent to 37 percent, residents oppose hiking the state’s gas tax to pay for it through the state’s depleted Transportation Trust fund.

Democratic legislators are still pushing hard for an increase, though. Negotiations in Trenton are coalescing around the possibility of a 25 cent hike, which would still put the state below New York's rate. Republicans, perhaps in a sign of the state's desperation, are willing to negotiate, but insist an increase has to be met with cuts to the state's inheritance or estate taxes. Democrats have publicly called the idea of a revenue-neutral gas tax "absurd."

Brigid Harrison, professor of political science and law at Montclair State University, said the politics are complicated even further by Gov. Chris Christie's presidential run. While there will be a push in the current lame duck session to institute a gas tax increase, it likely will not happen in earnest until next year, after the presidential primaries in New Hampshire and Iowa.

"By that time, the dust will have settled around Gov. Christie's career," Harrison said.