Christie, Assembly speaker reach deal on gas tax hike for sales tax cut

TRENTON - Gov. Christie and Assembly Speaker Vincent Prieto reached a deal late Monday to replenish the state's depleted fund for roads and bridges by raising the state's gas tax, while also reducing the sales levy in the interest of "tax fairness."

The state Assembly passed the transportation and tax package just before 1 a.m. Tuesday. At the end of a marathon  session that began around noon Monday, the legislation passed quickly with little discussion or debate.

To reach Christie's desk, the eight-year, $16 billion plan must still pass the Senate. Lawmakers in both parties of the upper house are said to oppose the legislative package, people familiar with the matter said, in part because it would blow a $1.4 billion hole in the budget by the time Christie leaves office.

Speaking briefly on the Assembly floor, Prieto (D., Hudson) said the legislation would put more money in the pockets of the working poor and middle class, and make a vital investment in the state's infrastructure.

"It creates a hole in a budget at a time when we're already having difficulty paying the bills," he said.

The legislation would more than double the state's tax on gasoline, from 14.5 cents per gallon to 37.5 cents. The tax hasn't been raised since 1988.

It would phase in a 1 percentage point decrease in the sales tax, from 7 percent to 6 percent, by the end of Christie's term in 2018. The legislation also would boost an exemption for seniors' retirement income from the income tax.

Throughout the day, top lawmakers dashed in and out of meetings with Christie, a Republican, who seemed intent on crushing any attempt by lawmakers to override his veto capability.

Heading into the session, both houses were scheduled to vote on legislation that would raise the gas tax as part of a 10-year, $20 billion transportation-funding plan.

Senate President Stephen Sweeney (D., Gloucester) and other Democrats had been working to build a coalition with Republicans large enough to override a potential veto by Christie, who has opposed tax increases since he took office in 2010. That would require a two-thirds majority in each house.

The original package included a proposed phaseout of the estate tax, an increase in a tax credit for the working poor, a bigger income tax exemption for seniors' retirement income, and a charitable-contribution exemption from the income tax.

The tax cuts would reduce revenue by $870 million a year by the time they took full effect. The gas tax hike is projected to raise $1.4 billion a year; more money for transportation needs would be raised from a tax on jet fuel and a portion of sales tax revenue.

Yet after meetings with Christie, lawmakers were considering scrapping those tax cuts and instead were weighing a reduction in the sales and use tax. The sales tax hits more residents than the other levies under discussion, so a reduction there had broader appeal among some legislators.

After reaching an accord with Prieto, Christie threw his arm around Prieto's shoulder outside the governor's office.

The Legislature is set to reconvene on Thursday.

"It's Trenton at its best," Assembly Minority Leader Jon Bramnick (R., Union) told reporters hours before the vote, describing the eleventh-hour talks. "Everyone's talking. That's the important thing."

The current 7 percent sales tax is projected to raise $9.7 billion in revenues for the fiscal year that begins Friday, according to the nonpartisan Office of Legislative Services. The budget that lawmakers sent Christie on Monday night totaled $34.8 billion in spending.

All revenue currently collected from the gas tax is used to make payments on debt, meaning the state has to take money from its general fund to pay for transportation projects.

A constitutional amendment that has already passed the Legislature would dedicate all new revenues collected by the gas tax to the Transportation Trust Fund.

Voters will decide the question in November.

Christie's five-year transportation funding plan, announced in 2011, is set to expire when the fiscal year ends June 30.

Supporters of boosting the transportation trust fund through a gas tax increase, backed by trade unions that stand to gain thousands of jobs from road work, say the legislation would strengthen New Jersey's economy and is needed to fix the state's crumbling roads and bridges.

Forty-two percent of New Jersey's roadway system is deficient, according to a report released this month by the American Society of Civil Engineers. One in 11 of its bridges is considered structurally deficient, the report said.

Opponents argue that the various proposed tax cuts don't do enough to offset the gas tax hike.

"Any such deal still does nothing to fix the structural problems within" the Transportation Trust Fund, said Erica Jedynak, state director of the conservative group Americans for Prosperity. "Gov. Christie and lawmakers owe it to taxpayers to reform the way the state is spending our transportation dollars before asking New Jersey families to pay another penny at the pump."

aseidman@phillynews.com

856-779-3846@AndrewSeidman