4 New NJ Tax Hikes Take Effect Oct. 1: Millionaires, Gas Tax

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  • Phil Murphy
    American businessman and diplomat, 56th Governor of New Jersey

NEW JERSEY – It's not just the millionaires who are going to may more. Just about everybody in New Jersey is facing a tax hike beginning on Thursday.

Four tax hikes went into effect on Oct. 1, all of which are expected to have a big impact on your driving and your wallet amid the coronavirus crisis (see list, and how much more you'll pay, below).

Drivers will have to cough up a lot more to pay for gas. Millionaires will have to pay more to help balance a state budget depleted by business shutdowns amid the pandemic. And there's also a tax hike that impacts HMOs.

Gov. Phil Murphy said his objective has been to provide "much-needed tax fairness" as the state seeks to emerge from the coronavirus crisis "stronger, fairer, and more resilient.”

The gas tax will help pay for highway and infrastructure maintenance, money for which was depleted when fewer people took to the roads amid the coronavirus shutdowns this year.

The millionaire's tax will help balance a budget also fraught with depleted revenues, and help boost funding for schools and related programs.

“As we continue to grapple with the effects of the pandemic, building a stronger New Jersey requires us to continue to bolster the middle-class families who are the backbone of our state,” Murphy said.

At the same time, Murphy said he's sought to soften the blow created by the new taxes by providing to rebates to homeowners who have children.

Murphy endorsed the rebates – and some of the tax hikes – when he signed a revised budget into law on Tuesday. Read more: Gov. Phil Murphy Signs Revised NJ Budget: Here's What It Will Do

Here are the tax hikes taking effect:

Gas tax hike

The New Jersey gas tax will jump as the state says tries to dig itself out of a financial hole caused by the coronavirus crisis, officials announced on Friday.

The Department of the Treasury announced that lower fuel consumption trends, which have been exacerbated by the COVID-19 pandemic, will necessitate a gas tax increase of 9.3 cents per gallon.

Due to the formula outlined in the law, the tax rate on gasoline and diesel fuel will increase on Thursday from 30.9 cents to 40.2 cents for gasoline and from 34.9 cents to 44.2 cents for diesel fuel, officials said.

When coupled with the current 10.5 cent motor fuels tax rate on gasoline and the 13.5 cent rate for diesel fuel, the total tax rates for gasoline and diesel fuel will be 50.7 cents and 57.7 cents, respectively.

The tax will rise to comply with the 2016 law that requires a steady stream of revenue to support the state's Transportation Trust Fund program.

Under the 2016 law signed by Gov. Chris Christie, New Jersey's TTF program is required to provide $16 billion over eight years to support critical infrastructure improvements to the state's roadways and bridges, officials said in a press release.

In order to ensure the state has the funds necessary to support these projects, the law dictates that the Petroleum Products Gross Receipt (PPGR) tax rate must be adjusted accordingly to generate roughly $2 billion per year, the release said.

"As we've noted before, any changes in the gas tax rate are dictated by several factors that are beyond the control of the administration," said state Treasurer Elizabeth Maher Muoio. "The law enacted in 2016 contains a specific formula to ensure that revenue is meeting a certain target.

The state legislature approved a plan four years ago to raise gas taxes by 23 cents, a Christie-backed plan that took effect Nov. 1, 2016. The state Senate voted 24-14 to approve the plan, while the state Assembly voted 44-27 to approve it, with nine not voting, soon afterward.

Read more: N.J. Gas Tax Hike: What You Need To Know

That year, the state's gas tax increased by 23 cents a gallon to 37.5 cents, an amount that was still less than the neighboring states of New York, Pennsylvania and Connecticut, according to supporters.

Millionaire's tax

Lawmakers in New Jersey reached a deal on passing a millionaire's tax as well as rebates for homeowners. The deal takes effect on Thursday.

Murphy said the coronavirus crisis has had a staggering impact on New Jersey's economy and the state's middle class "needed an extra push" since many people have lost their jobs.

The additional revenue will help provide middle-class tax relief and more money for schools, the governor said.. "Now is the time that the wealthiest among us are also called to sacrifice," Murphy said.

Senate President Steve Sweeney, who has long resisted a millionaire's tax, said his opposition wasn't political, but circumstances have changed since the outbreak began in March.

"The pandemic hit and things have changed and we have to face the reality that a lot of families are hurting here," Sweeney said.

The millionaires tax will mean this: a 10.75 percent marginal tax rate currently imposed on income over $5 million will be imposed starting at $1 million in taxable income. This proposal is expected to raise $390 million in FY 2021, officials said.

The deal includes a $500 rebate to families with at least one dependent child whose households earn less than $150,000 per year. The rebate will apply to families with a single parent earning $75,000 or less.

The rebate checks will be based on tax filings next April, so Murphy said he expects New Jersey homeowners will get them during the summer of 2021.

Sweeney and many Republicans have long opposed a millionaire's tax because they feared it would drive more business and industry out of the state.

HMO tax

This plan increases the current annual assessment on net written premiums of HMOs from 3 to 5 percent and raises an estimated $102.7 million in FY 2021.

The legislation, sponsored by Sen. Nellie Pou, D-Passaic, will increase the assessment on Health Maintenance Organization (HMO) premiums to fund charity care payments to hospitals.

“In a time of great anxiety given the deadly coronavirus pandemic, not to mention uncertainty in regard to the future of Obamacare, and when tens of thousands of New Jerseyans are worried about where they’ll find the money to pay for health care, this HMO assessment is a shot in the arm, and will help bolster the resources that shore up our safety net for those most at risk,” said Pou.

“Because the overwhelming majority of HMO enrollees in New Jersey are covered by Medicaid, the bulk of the $162 million in revenue raised will come back to the state in the form of increased federal Medicaid payments,” Pou said.

Corporate business tax

Murphy and lawmakers agreed to restore a 2.5 percent surtax on the Corporation Business Tax for corporations with taxable net income in excess of $1 million.

The tax was supposed to drop to 1.5 percent this year, and then it was scheduled to be eliminated by the end of 2021. Now it's extended through 2023.

The tax is expected to yield an estimated $210 million during the 2020-21 fiscal year, Murphy said.

This article originally appeared on the Hillsborough Patch

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