New Jersey Lawmakers Propose Deal on Gas, Death Taxes

Published January 18, 2016

New Jersey lawmakers are proposing pairing an increase in the state’s gasoline excise tax with reforms of the state’s death tax.

New Jersey taxpayers currently pay about 33 cents in excise taxes on each gallon of gasoline, approximately 15 cents of which go to the state government.

Under existing state law, property inherited by individuals from deceased family members worth more than $675,000 is subject to state taxation.

Lawmakers are negotiating trading a 25-cents-per-gallon increase in the state’s gasoline excise for a currently undetermined increase in the state’s death tax exemption value, which would subject fewer estates to the tax.

No Grand Bargain

Mike Proto, communications director for the New Jersey chapter of Americans for Prosperity, says the two taxes should be handled as separate issues.

“We oppose the rumored deal of the gas tax hike in exchange of getting rid of death taxes here in New Jersey.” Proto said. “We believe those issues should be handled separately. It takes discipline by our lawmakers to try and find the money within the budget and use the money that is constitutionally dedicated, [and] statutorily dedicated, for the transportation trust fund.”

‘Benefits Test’

Richard Borean, the manager of communications at the nonpartisan Tax Foundation, says if the revenue is spent properly, gas tax hikes are not necessarily a bad idea.

“Gas taxes generally better conform to the ‘benefits test’ than most taxes, especially if they are dedicated to transportation.” Borean said. “This is essentially a ‘user fee,’ or as least as close to one as you can get within taxation, where individuals paying the gas tax are also the same individuals using the roads, contributing to the congestion and maintenance costs.”

Borean says the two taxes affect different taxpayers, and direct comparisons are difficult.

“They are not comparable taxes in the sense that the reduction in one will not offset the increase in the other for the median taxpayer.” Borean said. “However, New Jersey is very atypical in its treatment of inheritance and estate taxes.

“A trade involving an increase in the gas tax and reduction in the estate tax, which again is an unusual tax—only 16 [states] levy one and only two levy both inheritance and estate taxes—would come closer to the general standards of taxation, including neutrality and a ‘this user pays’ benefits-test idea,” Borean said.

Andrea Dillon ([email protected]) writes from Holly Springs, North Carolina.