TRENTON – Senate President Stephen Sweeney and Assembly Speaker Vincent Prieto today announced that they have reached agreement on a new plan to fund the Transportation Trust Fund and enact a series of tax cuts designed to make New Jersey more competitive.
“We have an agreement on a plan that is needed to address the state’s critical transportation needs at the same time it provides targeted tax savings for retirees, the working poor and middle class families,” said Senator Sweeney (D-Salem/Cumberland/Gloucester). “This is a bipartisan plan that supports a $2 billion a year Transportation Trust Fund and provides affordable tax cuts that will allow us to meet the state’s pension obligations without creating a fiscal crisis. This is an investment plan that will create jobs and support immediate and long-term economic growth.”
“The Assembly acted to fund transportation, but this stalemate cannot continue,” said Prieto (D-Hudson/Bergen). “As I’ve been saying for more than two years, New Jersey needs a viable Transportation Trust Fund or we risk economic disaster. With efforts to negotiate a compromise with the governor stalled, I’m pleased to reach this new compromise that will provide much-needed investment in our state’s infrastructure and tax relief. I will now look for a firm commitment of strong support from Assembly Republicans to keep our roads and bridges safe and workers on the job. This is too important for our economy. We must get this done for the benefit of our state’s future.”
Senator Sweeney said that he is calling in the Senate Budget and Appropriations Committee to convene next week to amend the bill passed by the Assembly at the end of June to reflect the new plan.
The agreement includes a 12.5 percent increase in the Petroleum Products Gross Receipts Tax, a four-cent diesel surcharge and a seven percent tax on non-motor-fuel petroleum products to fund the TTF, which has essentially run out of money for new transportation projects after years of over borrowing. The new gas tax revenue would cover old debt payments, freeing up $347 million from the general fund for other needs.
If passed along to motorists, the gas tax would increase by 23 cents a gallon. An estimated 35 percent would be paid by out-of-state motorists. The dedicated revenue would generate $1.2 billion annually, which would support $2 billion in infrastructure investments each year.
A sustained investment of $2 billion annually would produce an estimated $4.7 billion a year in economic activity and create more than 34,000 jobs directly and indirectly, with annual payrolls of $1.4 billion. Each dollar spent from the TTF generates $2.35 in economic activity.
The plan also includes five tax cuts worked out over the past several months during ongoing negotiations involving Democratic and Republican lawmakers from both the Senate and the Assembly. The plan does not include any changes in jet fuel taxation.
The tax cuts would provide:
· Tax Savings for the Working Poor: Increase the Earned Income Tax Credit for the working poor to 40 percent of the federal benefit amount beginning in Tax Year 2016. Total tax savings of $137 million annually.
· 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. In the fifth year, seniors earning up to $125,000 can take a 50 percent credit on up to $100,000 in retirement income and those making up to $150,000 can take a 25 percent credit. Total tax savings of $75 million the first year and $164 million annually when fully phased in.
· Eliminate the Estate Tax To Make NJ More Competitive: Phase out the estate tax over 3 1/2 years, replacing the current $675,000 threshold with a $2 million exclusion after January 1, 2017, going to the federal $5.4 million level from January 1, 2018, to December 31, 2019, and eliminating the estate tax altogether as of January 1, 2020. Total tax savings of $109 million the first year and $552 million annually when fully phased in.
· Tax Deductions for NJ Motorists: Provide an annual income tax deduction on up to $500 in state gas taxes paid for all New Jersey motorists with incomes up to $100,000. Total tax savings of $20 million annually.
· Tax Savings for Veterans: Provide a $3,000 personal exemption on state income taxes for all New Jersey veterans honorably discharged from active service in the military or the National Guard. Total tax savings of $23 million annually.