After a thorough review of fuel consumption statistics and consultation with the Legislative Budget and Finance Officer, the Department of the Treasury announced on Monday that New Jersey’s gas tax rate will increase by 2.6 cents per gallon beginning January 1, 2025 to support the State’s Transportation Trust Fund (TTF) program. This increase is the result of the 2024 law (Chapter 7) which gradually raises the State’s Highway Fuel Cap from Fiscal Year 2025 through Fiscal Year 2029. The FY2025 Highway Fuel Cap is set by the new statute at exactly $2.032 billion, which is $84 million, or 4.3 percent higher than the previous baseline level of $1.948 billion, and will increase each fiscal year, reaching $2.366 billion in FY2029.
“Based on our review of the consumption data, combined with the requirement to meet the new statutory target, we have determined that the new formula dictates a 2.6 cent increase this coming January,” said State Treasurer Elizabeth Maher Muoio. “We are pleased that this dedicated funding stream continues to provide billions of dollars across the State to support our critical transportation infrastructure needs.”
Under Chapter 7, New Jersey’s TTF program is required to provide nearly $11 billion over five years to support critical infrastructure improvements to the State’s roadways and bridges. In order to ensure the State has the funds necessary to support these projects, the law dictates that the Petroleum Products Gross Receipt Tax (PPGRT) rate must be adjusted accordingly to generate enough revenue to meet the statutory Highway Fuel Cap for that fiscal year.
What is generally called the “gas tax” or the “highway fuels tax” is actually two separate taxes on gasoline and diesel fuel – the Motor Fuels Tax and the PPGRT.
Under the formula explicitly outlined in Chapter 7, the PPGRT rate will increase on January 1, 2025 from 31.8 cents to 34.4 cents for gasoline and from 35.8 cents to 38.4 cents for diesel fuel. When combined with the Motor Fuels Tax, which is fixed at 10.5 cents for gasoline and 13.5 cents for diesel fuel, the total tax rates that motorists will pay for gasoline and diesel fuel will be 44.9 cents and 51.6 cents, respectively.
Background on Chapter 7 & Calculation of Tax Rate Formula
Under Chapter 7, a statutory formula determines how much the PPGRT rate is to be adjusted annually in order to meet that year’s Highway Fuel Cap. The Treasurer is required to meet with the Legislative Budget and Finance Officer on or before November 15 of each fiscal year to determine the total revenue derived from highway fuels consumption. This process just concluded, with Treasurer Muoio and LBFO Thomas Koenig consulting on consumption data and revenue collections.
The PPGRT rate may be adjusted annually for the following two reasons:
- to correct for a prior fiscal year’s revenue shortfall or surplus in meeting the Highway Fuel Cap; and
- to correct for whether projected highway fuels consumption in the current fiscal year will be enough to meet the Highway Fuel Cap for the current fiscal year.
When necessary, the PPGRT rate is adjusted:
- higher (lower) if revenues for the previous fiscal year were below (above) the revenue target for that year;
- higher (lower) if consumption for the current fiscal year falls short (above) of the defined Highway Fuel Cap.
FY 2025 Rate Calculation
Treasury applied the above formula based on the following revenue numbers:
- After consultation between the State Treasurer and the Legislative Budget and Finance Officer during the review period in November 2025, the Highway Fuel Cap for FY 2025 is $2.032 billion, as set by the statute.
Supporting Statistics
Consumption of gasoline and diesel fuel in FY2025 is projected to be 0.6 percent above FY2024 levels.
As a result, the FY2025 PPGRT rate will be higher than in FY2024 because of the increased Highway Fuel Cap, as set by the statute.
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The Treasury Department has recently announced that starting on January 1, 2025, the gas tax rate will increase by 2.6 cents per gallon. This increase comes as part of a plan to generate additional revenue for infrastructure projects and maintenance across the country.
The gas tax is a crucial source of funding for transportation infrastructure, including roads, bridges, and public transportation systems. The revenue generated from the gas tax is used to repair and maintain existing infrastructure, as well as to fund new projects that improve transportation efficiency and safety.
The increase in the gas tax rate is necessary to keep up with the rising costs of infrastructure maintenance and construction. As vehicles become more fuel-efficient and alternative forms of transportation become more popular, traditional sources of revenue for transportation projects are becoming less reliable. By increasing the gas tax rate, the government can ensure that there is enough funding available to support vital infrastructure projects.
It is important to note that the gas tax is a user fee, meaning that those who use the transportation system are the ones who pay for it. By increasing the gas tax rate, the burden of funding transportation infrastructure is placed on those who benefit from it the most.
While no one likes to see an increase in taxes, it is important to remember that the gas tax is an essential source of funding for transportation projects that benefit everyone. By investing in our infrastructure, we can create safer and more efficient transportation systems that benefit individuals, businesses, and communities across the country.
Overall, the increase in the gas tax rate is a necessary step to ensure that our transportation infrastructure remains safe, reliable, and efficient. By investing in our infrastructure now, we can create a better future for generations to come.
