Mike Davis

@byMikeDavis

TRENTON - New Jersey taxpayers would pay 23 cents more per gallon of gasoline but see the sales tax slashed from 7 to 6 percent under a new proposal approved by the Assembly early Tuesday morning.

The legislation provides for an annual $2 billion Transportation Trust Fund over eight years and will bump up the state's gasoline tax from 14.5 cents per gallon to an estimated 37.5 cents per gallon, the seventh-highest in the United States.

At the same time, the sales tax would drop from 7 percent to 6.5 percent on Jan. 1, 2017 and down to 6 percent as of Jan. 1, 2018.

“This is something that is so important to the state of New Jersey, to be able to take care of our infrastructure and invest in New Jersey, to create jobs and help our economy. And at the same time, it creates tax fairness,” Assembly Speaker Vincent Prieto, D-Hudson said before placing the bill up for a vote. “We’re going to lower a tax that will affect 9 million people in the state of New Jersey. Every resident pays sales tax in the state of New Jersey.

"That’s additional money that goes into the pocket of the working class, especially, and the middle class,” he continued.

MORE: Gas tax hike, estate tax cuts advance in Legislature

A 53 to 23 vote, with four abstentions, came just before 12:45 a.m. -- more than 14 hours after negotiations began between Democrats, Republicans and Gov. Chris Christie over a deal that will renew the state's depleted Transportation Trust Fund.

The fund, which pays for road repairs, mass transit and bridge construction, won't be able to pay for anything but debt service as of July 1 if it's not renewed.

"This is the first broad-based tax cut for all New Jerseyans since 1994," Christie said, speaking to reporters outside his office after 1 a.m. "I think it was needed (and) necessary, while at the same time to have constitutionally-dedicated revenues to improve roads, bridges and mass transit systems in this state. I'm pleased with the action the Assembly took and I look forward to working with the Senate."

The Senate is expected to vote on the new Transportation Trust Fund and sales tax bill on Thursday. If approved, it will head to the governor's desk.

Lawmakers began the day expecting to vote on a different plan with bipartisan support that originated in the Senate.

That bill, proposed by Sens. Paul Sarlo, D-Bergen, and Steve Oroho, R-Sussex, would raise the gasoline tax by the same amount while phasing out the estate tax, establishing a charitable tax deduction, cutting retirement income taxes and raising a tax credit for low-income filers.

In Prieto's new legislation, only the retirement taxes and gasoline tax remained.

Votes on that bill were postponed in both chambers. Senate Majority Leader Loretta Weinberg, D-Bergen, said the Senate wanted to review the costs of the sales tax cut before weighing in.

The other main tax cut in the bill comes from raising the tax-free threshold on retirement income. Currently, the threshold sits at $15,000 for an individual. By 2020, it will increase to $75,000 for an individual, $50,000 for a married couple filing separately, and $100,000 for a married couple filing jointly by Jan. 1, 2020.

The sales tax cut alone would result in about $1.3 billion in lost revenue once the new 6 percent sales tax is fully implemented, by January 2018 -- but Prieto said the new gas tax revenue is expected to match it.

“I wish we were voting on a TTF bill that just funded the TTF, that addressed that needed issue fairly and in a way that made sense,” said Assemblyman John Wisniewski, D-Middlesex, a longtime advocate for raising the gasoline tax. “The notion that we need to implement tax fairness that gouges a huge hole in our budget is beyond belief. It’s not true, it’s not real and it’s something we will live to regret.”

Recent polls have shown the public firmly against any tax: A Quinnipiac poll released in May found 54 percent of New Jerseyans were opposed to a gas tax hike.

“There’s that sense of desperation: ‘Oh God, another tax. One more tax,’” said Sen. Jennifer Beck, R-Monmouth, during a June meeting with the Asbury Park Press editorial board. “And there’s the mistrust that the government would do the right thing with the revenue anyway.”

Still, supporters of the bill jammed the Statehouse hoping to influence a positive vote in favor of the Sarlo-Oroho bill. An army of laborers in orange and yellow T-shirts reading "Fund the TTF now!" packed the legislative chambers and prowled the hallway looking for news.

As the day dragged on without a vote, they were joined by lobbyists and legislative staffers all wondering whether lawmakers had the necessary votes.

Republicans in the Legislature had insisted on the tax cuts in order to secure their support for any gasoline tax hike. Christie said earlier this year said the Legislature was responsible for coming up with a plan that includes "tax fairness," the governor's buzzword for a tax-neutral proposal.

But it became clear on Monday night that the Legislature didn't have the Republican votes necessary to override an expected veto by Christie -- and Democrats were loathe to approve a gas tax hike without Republican support.

"If they come to me with a plan that represents (tax fairness), I’ll consider it, but right now this does not," Christie said last week. "I have an open mind to work with them on coming up with a plan that helps to fund what people in the state want, which is better roads, better bridges, better mass transit.

"They also want tax fairness, and we can do it, but they are going to need to work with me to that," he continued.

Raising the gasoline tax has been identified by legislators and transportation experts as the best way to renew the state's Transportation Trust Fund, which pays for billions in road repairs, mass transit improvements and bridge construction. As of fiscal year 2017, the fund will only have enough revenue to pay for debt service -- with no funds available for actual work to be completed.

MORE: TTF has big needs, slack funding

Earlier this month, the American Society of Civil Engineers gave a “D+” grade to New Jersey’s infrastructure ranking the condition of its transportation, waste and water management near the bottom in the country.

The Sarlo-Oroho plan would include a $400 million boost to the TTF. The resulting $2 billion fund has been eyed by transportation experts and advocates as just the starting point, if the state is to fund transportation at the ideal level.

"We'd like it to be much higher," said Janna Chernetz, New Jersey policy director at the Tri-State Transportation Campaign. "We've had a $1.6 billion TTF program the last 10 years, and it's a historically stagnant capital program. The $2 billion would bring it on par with the cost of inflation, but we're still seeing a historically stagnant program."

Contributing: Associated Press

Mike Davis: 732-643-4223; mdavis@gannettnj.com

In Prieto's new legislation, only the retirement taxes and gasoline tax remained.