Raise the New Jersey Gas Tax!
Jude Wanniski
August 12, 1998


Memo To: N. J. Governor Christine Todd Whitman
From: Jude Wanniski
Re: Your Gas Tax Proposal

Believe it or not, Christie, I agree with you and disagree with The Wall Street Journal, which castigated you as a supply-side apostate in an editorial, "Gas Tax in Flames" (July 31). Your letter to the editor, August 4, was persuasive on the need to raise dedicated revenue in order to repair the state's roads and bridges. As a resident of New Jersey, I would completely agree that the seven-cent gasoline tax should be increased by four cents in order to pay for public transportation infrastructure. The seven cents a gallon has diminished in purchasing power because of inflation and is now worth about what one cent was producing for highway repair in 1970. As I explained in The Way the World Works, a copy of which I gave you when you first ran for statewide office in 1988, monetary inflation causes progressive tax rates to increase in real terms, causes proportional tax rates to remain the same, and causes specific taxes to decline in real terms. This is why I supported Ronald Reagan's federal gas tax increase in 1982. As your letter indicates, it is quite likely the voters of New Jersey would approve a four-cent gas tax increase, as it is dedicated to transportation improvement and not other programs.

Where I have disagreed with you in years past on tax matters is on the subject of capital-gains taxation. You know I still believe you could have beaten Bill Bradley for that Senate seat in 1988 if you had pressed him on the key role he played in raising that tax in 1986. In the years since you won the governorship, you should have pressed the legislature to eliminate the capgains tax for the state, as it is a loser for the state all the way around. The WSJournal's irritation with your gas tax proposal has to do with New Jersey's $700 million budget surplus. This is largely the result of the federal government lowering the capital gains tax last year, which produced a bonanza for all the states as the stock market capitalized the increased growth potential. If you were proposing to cut tax rates on incomes and capital gains, instead of hoarding this $700 million which really flows from the exertions of congressional Republicans, your gas tax proposal would not seem so grabby. Don't you agree?

It seems a perfect package for you to propose, as the gas tax proposal can easily be defended and because it has the support of the construction unions. The Democrats in the legislature would make noise about the package being bad for the little guy, but the voters would exult.