Gas pumps

State lawmakers on Monday introduced bills imposing a 12.5 percent tax on petroleum.

(File photo)

TRENTON -- Leading state lawmakers on Monday introduced legislation Monday raising New Jersey's uniquely low tax on gasoline by 23 cents.

The details of the legislation, an elaborate blend of tax cuts and hikes, unveiled earlier this month, have changed. But the plan still raises the gas tax in exchange for the elimination of the estate tax, a greater exemption for retirement income, an increase in the Earned Income Tax Credit for low-income workers, and creation a tax deduction for charitable giving.

Sens. Paul Sarlo (D-Bergen) and Steve Oroho (R-Sussex) announced they introduced the bipartisan proposal Monday.

Tom Hester, a spokesman for the Assembly Democrats, told NJ Advance Media that Speaker Vincent Prieto (D-Hudson) introduced identical bills in the Assembly.

The path to introduction was a long one as lawmakers looked for a way to replenish the Transportation Trust Fund, which is running out of money to pay for new projects.

With the increased gas tax, the sponsors said New Jersey will be able to afford a $20 billion transportation program over the next 10 years that doubles the annual aid to municipalities to $400 million a year.

"This is a detailed and far-reaching plan that will address New Jersey's vital transportation needs at the same time it delivers a significant boost to the economy, creating jobs and helping to sustain long-term economic growth," Sarlo said.

Under one of the bills, the state would levy a 12.5 percent tax on petroleum products that refineries are expected to pass onto the consumer. At current prices, that amounts to nearly 23 cents on every gallon of gas on top of the existing 14.5 cent-per-gallon tax.

The tax wouldn't be charged against pre-tax gas prices over $3, so the per gallon gas tax would never exceed more than 52 cents per gallon, which is unlikely based on projections for gas prices.

Based on current gas prices, drivers would pay about 37.5 cents per gallon -- the seventh highest in the U.S.

It would also impose a 7 percent tax, about 13 cents a gallon, on jet fuel.

The sweeping legislation also cuts hundreds of millions of dollars in taxes paid by wealthy New Jerseyans, retirees and the working poor.

The most controversial of the cuts, the phasing out of the estate tax over three years, would lose the state $540 million a year in revenue once it is fully eliminated. It's estimated about 4 percent of estates are subject to the estate tax each year.

Residents filing jointly also will not have to pay income taxes on retirement income, including pensions, up to $100,000, up from $20,000. The new limit is $75,000 for individuals and $50,000 for those married by filing separately. The newly revised plan also gives a tax break, though smaller, to residents collecting up to $150,000 a year in retirement income.

Additionally, a popular tax credit for about a half million low-income workers here would increase from 30 percent of the federal credit to 40 percent as proposed by Prieto.

The package incorporates a charitable donations tax deduction hatched by by Republicans to encourage and reward in-state giving.

"This is a plan that delivers tax fairness with a tax structure that is more competitive with other states by reducing taxes on senior citizens, middle class families and on estates that are passed down from parents and grandparents," Oroho said in a statement.

No longer part of the deal is a tax deduction for spending on gas taxes that few drivers were expected to qualify for.

Though the leading plan to raise money for the Transportation Trust Fund, it has its naysayers. Two Republican senators called the deal a "shell game" designed to give lawmakers cover to vote for a gas tax increase, while a pair of Democrats said it jeopardizes funding for critical safety net programs in the budget.

Gov. Chris Christie, too, who prompted the far-reaching deal with his call for "tax fairness," has signaled his skepticism, saying it doesn't satisfy his appetite for tax reductions. While Democrats control both the Senate and Assembly, they would need help to override a veto from the governor.

Samantha Marcus may be reached at smarcus@njadvancemedia.com. Follow her on Twitter @samanthamarcus. Find NJ.com Politics on Facebook.