The Gas Tax Should Increase and Other Taxes Should be Cut

Murray Sabrin


Sabrin calling for a tax hike. Has the author of Tax Free 2000, a blueprint for a tax free society, lost his marbles? Has he sold out? What’s going on here?

Let’s do a reality check.

Too many state and local roads have potholes, bridges are crumbling and the Transportation Trust Fund is about to run out of money, because bonds were issued years ago to repair the state’s roads, and now virtually all the gas tax revenue has to be used to pay off the bonds. Welcome to New Jersey.

The government has a virtual monopoly on roads and highways and a steady stream of funds to build and maintain roads and bridges. The state gas tax and federal highway funds—funded by you and me every time we fill up at the pump--flow into Trenton. We should expect the state transportation experts to maintain the roads and highways to insure a smooth flow of people and goods within New Jersey.

The state government “owns” and maintain the roads and streets. That’s how our society has evolved. We the people should expect that the government to do at least one thing right, even though the private sector could do a much better job than the bureaucrats in Trenton of providing and maintaining the roads. Private enterprise is building roads throughout the world and in the United States, by the way.

In the meantime, we have to deal with the reality of New Jersey’s highways and bridges.

Gas taxes are going up. Governor Corzine (even though he hasn’t taken office yet I will refer to the next guv by his title) wants to increase the gas tax. Democrats we hear are nervous about voting for a gas tax. They should be. They raised every conceivable tax, and the money has been squandered, wasted, stolen, etc., under their “leadership.”

Governor Corzine should propose a 20 cent a gallon tax hike to replenish the trust fund and get the roads and bridges repaired. He should explain to the people of New Jersey that this will cost an extra $80-$200 per year in higher gas taxes per vehicle in the state.

Let’s do the arithmetic. If you drive 12,000 miles per year and your vehicle gets 20mpg, you use 600 gallons of gasoline per annum. A 20 cent gas tax hike will cost you an additional $120 per year. If your vehicle gets 30 mpg, the gas tax hike will set you back $80 per year. If you drive more miles annually, you can easily calculate the additional gas tax—which is really a user fee and the least objectionable tax we have because we get a tangible benefit, roads to take us where we want to go in relative comfort.

For Governor Corzine to get this passed easily, he should reduce the sales tax by one percent to 5%. This would save families from $50 to several hundreds of dollars per year, depending on their income and spending on taxable items. Because of previous incompetence, misfeasance and possible corruption, the people should pay less sales taxes in order to replenish the Transportation Trust Fund.

The state’s 6% sales tax brings in about $6 billion per year. A 5% sales tax would thus bring in $5 billion to the state treasury, all else being equal, requiring a one billion dollar reduction is state spending so the budget would not have a one billion imbalance between spending and revenue. A good idea if there ever was one. However, New Jersey retailers should get a sizeable boost from a sales tax reduction to 5%. The sales of high ticket items—automobiles, jewelry, high end electronics, computers, etc., would rise and the additional sales tax revenue would make up for some of the revenue loss that would result from a 5% sales tax.

In addition, a sales tax is considered “regressive”, because it takes a bigger chunk out of low income families’ budgets. Thus, Democrats should support a lower sales tax, because after all they are the self proclaimed champions of the “little guy.”

(Moreover, all of McGreevey’s tax hikes should be abolished as well. But that’s for another column.)

This is not a “supply side” tax proposal to boost tax revenue with a tax cut so the state can keep on spending and spending. On the contrary, a gas tax hike to help pay for the roads and bridges would upgrade the state’s infrastructure so businesses can prosper, jobs can be maintained and created, tourism can flourish, and we could continue to travel to and from work easily and drive around the state without interminable delays and hassle.

If Jon Corzine really wants to be a great governor, he needs to cut spending, reduce taxes, eliminate ridiculous regulations and mandates, and end the waste and corruption that is so pervasive in New Jersey. If he does, he will deserve reelection. If Corzine governs as another tax, and spend, borrow and regulate politician, the state’s economy will be in deep trouble sooner than he thinks—and his political career will be over.


Murray Sabrin, Ph.D., is professor of finance in the School of Business, Ramapo College of New Jersey, where he is also executive director of the Center for Business and Public Policy, www.ramapo.edu/cbpp