Gas pumps
Senate and Assembly leaders announced a new proposal for replenishing the Transportation Trust Fund on Friday.
(File photo)
TRENTON -- Two weeks into a road construction stoppage, Democratic leaders in the Legislature released a joint proposal Friday to solve a transportation funding crisis.
That plan is unlikely to win over Gov. Chris Christie, who has called for matching the proposed 23-cent tax increase on a gallon of gas with a broad-based tax cut. Absent his support, the Senate and Assembly must secure veto-proof majorities to override him.
Their previous proposal was rejected by Christie, creating an opening for the governor to step in and strike a deal with the Assembly to cut the sales tax.
The new alternative announced Friday looks a lot like the original legislative proposal, and could gain support from both Democrats and Republicans.
Here are seven things to know about the new deal:
1. Yes, gas taxes would go up by 23 cents per gallon
New Jersey would go from having the second-lowest gas tax in the nation to the seventh-highest. And it would go up immediately. The tax hasn't been raised since 1988.
2. It does away with Christie's proposed cut in the sales tax
The governor wants to roll back the sales tax from 7 cents to 6.5 cents in 2017 and from 6.5 cents to 6 cents in 2018. Christie said that tax reduction did a better job softening the blow of the gas tax hike than the Senate plan and helped more people. Tax cuts in the original legislative plan largely benefited retirees and the working poor.
Senate President Stephen Sweeney said the state is already struggling to pay its bills and can't afford the sales tax cut. It would cost the state budget $1.7 billion by 2020 and $1.9 billion by 2022, according to the nonpartisan Office of Legislative Services.
Instead, the Legislature's new proposal would create a patchwork of tax cuts that would reduce state revenues by about $900 million once all the tax changes are fully phased in.
3. The largest tax cut: Eliminating the estate tax
New Jersey levies a tax on a person's estate after he or she dies. The tax kicks in at estates worth at least $675,000, which is the lowest threshold in the nation. (The federal government doesn't collect taxes on estates below $5.4 million).
New Jersey is also one of two states to levy both an estate tax and an inheritance tax, which is levied on those inheriting money who are not surviving spouses, parents, children or grandchildren.
Getting rid of the estate tax was also the centerpiece of the plan introduced in the Senate and Assembly back in June. But the new plan changes how the tax would be phased out.
Its threshold would now increase from $675,000 to $2 million on Jan. 1. In 2018 it would increase to $5.4 million to reflect the federal estate tax limit. The estate tax would disappear after Jan. 1, 2020.
Fully eliminated, it would cost the state $550 million a year.
4. A boost for the working poor
The Earned Income Tax Credit, a popular tax credit for low-income workers, would increase from 30 percent to 40 percent of the federal limit. Sweeney said this would make New Jersey's EITC the second-highest in the U.S.
This was also part of the original proposal and was recommended by progressive groups to help offset the gas tax increase for those as the bottom of the wage scale.
5. An important tax break for those who get pensions and retirement income
This was also part of the earliest plan by lawmakers and the governor's proposal.
A married couple filing their taxes jointly can currently exclude their first $20,000 in retirement income from state income taxes. That would rise to $40,000 in 2017; $60,000 in 2018; $80,000 in 2019; and $100,000 in 2020.
For a single taxpayer, the exemption would rise to $30,000 in 2017; $50,000 in 2018; $65,000 in 2019; and $75,000 in 2020.
The retirement exclusion for those who are married but filing separately would rise to $20,000 in 2017; $30,000 in 2018; $40,000 in 2019; and $50,000 in 2020.
Retirement income between $100,000 and $150,000 would receive a lesser tax break.
6. New tax deduction for drivers
The sponsors want to introduce a tax deduction up to $500 for drivers making up to $100,000 a year.
The gas tax hike is projected the cost the average driver about $150 a year -- more or less depending on the number of miles driven and gas mileage.
A gas tax deduction had been dropped from the original legislative bill.
7. Some tax help for veterans
They're also proposing a new $3,000 personal income tax exemption for veterans.
Sweeney said this was important to lawmakers on both sides of the aisle.
Samantha Marcus may be reached at smarcus@njadvancemedia.com. Follow her on Twitter @samanthamarcus. Find NJ.com Politics on Facebook.