NJ Treasury Announces Cut to Gas Tax
The NJ Department of the Treasury announced Tuesday that the NJ gas tax rate will decrease by 8.3 center per gallon. The change will go into effect beginning October 1st, in compliance with the 2016 law requiring a steady stream of revenue to support the state’s Transportation Trust Fund program that provides billions of dollars for transportation infrastructure needs across the state.
The law requires the gas tax rate be adjusted annually to generate approximately $2 billion per year. Two separate taxes for gasoline and diesel comprise the Motor Fuels tax and the Petroleum Products Gross Receipts tax (PPGR). Beginning Oct. 1, 2021, the PPGR tax will decrease from 40.2 cents to 31.9 cents for gas, and from 44.2 cents to 35.9 cents for diesel fuel. These two taxes are combined with the fixed Motors Fuels Tax of 10.5 cents for gas and 13.5 cents for diesel for the total tax rate of 42.4 cents for gas and 49.4 cents for diesel. The tax rates are reviewed annually and can be adjusted for different reasons including to correct the prior year’s revenue shortfall or surplus, or to correct if projected fuel consumption is above or below the FY 2016 consumption levels.
In 2020, the Treasury estimated consumption of gas and fuel would decline by 15% from pre-pandemic levels in 2019, but the faster than anticipated economic recovery resulted in only a 13.6% decline. Because the 2021 consumption was in line with projections, it wasn’t necessary to increase to make up for a shortfall.
Currently, consumption is projected to still be lower than 2016 levels because many workers continue to work remotely.
For more details on how these tax rates are calculated, visit the NJ Treasure page here.