Transportation Trust Fund

Ever since the emergence and rise of the automobile during the 1920’s, America has increasingly relied on the building of highways for both personal transportation as well as industry advancement. The federal Highway Trust Fund was initially created in the United States beginning in 1956 to finance the Interstate Highway System. This fund currently receives money from a federal fuel tax of 18.4 cents per gallon on gasoline and 24.4 cents per gallon of diesel fuel. As federal transportation spending routinely surpasses the fuel tax revenues that fund it, the federal government is put into a stalemate.

The remaining responsibility was then placed at the state level, with many creating their own Transportation Trust Funds to finance the necessary repairs as well as the creation of new transit systems. New Jersey policy makers have been prominent in the news recently as they deal with this exact dilemma after their TTF was drained as of early summer, leading to Governor Chris Christie halting all non-emergency roadwork on July 8th 2016. After months of going back and forth, the New Jersey lawmakers have approved a bipartisan deal that raises fuel taxes for the first time in three decades.

The fuel tax will substantially increase what is paid at the pump in New Jersey, specifically by 23 cents per gallon for gasoline and 27 cents for diesel. The New Jersey Motor Truck Association said on Oct. 11 that the gasoline tax increase should go into effect on Nov. 1 while the diesel hike will be implemented in two stages starting next year: The first increase will come on January 1 and the second on July 1.

In an attempt to appease truck drivers, the plan delays implementation of the diesel tax until next year. At that time, the diesel rate will be raised by 13.5 cents. The remaining 13.5-cent rate increase will be imposed in 2018. Gail Toth, executive director of the New Jersey Motor Truck Association, has said advocates for the diesel tax increase are either fooling themselves or do not care how it will affect trucking operations. “Their mindset is ‘you’re going to pass it on anyway,’” Toth previously told Land Line. “So, as a result everyone is going to pay more for everything – milk, groceries … everything. Politicians don’t want to emphasize that fact.”

It has been estimated that the higher fuel taxes will account for about $1.2 billion of the $2 billion earmarked annually for the TTF by Christie. Under the governor’s plan, the state will borrow the rest. The bipartisan deal includes measures to offset the resulting higher fuel costs with other tax cuts. These tax cuts aren’t met with a positive outlook by the Bloomberg report, giving the announced plan of action a credit negative outlook due to the strain it will put on the states operating budget.

It is interesting to see how other states may follow suit, and how this may affect other aspects of the freight industry within the Garden State as well as nationwide. If you have additional questions regarding the NJ gas tax or how it may affect your future freight shipments in and out of NJ, please reach out to our PNG Logistics offices at (717) 626-1107 x 3 or email at sales@pnglc.com