New Jersey Governor Pushes Back on Gas Tax Holiday Amid Budget Negotiations

TRENTON, N.J. — Governor Mikie Sherrill is resisting a growing chorus of calls from Republican lawmakers to suspend New Jersey’s gas tax, setting up a significant policy battle as state budget negotiations intensify in mid-May. The debate follows a proposal by President Donald Trump to pause the federal gas tax and a subsequent bill from U.S. Representative Jeff Van Drew (R-NJ) to enact an 18-month federal suspension, with Van Drew urging the governor to take similar action at the state level.

The push for a tax holiday comes as fuel prices have soared, with the average price of a gallon of gas in New Jersey reaching $4.53, up from $2.98 a year ago, according to AAA data cited in a New Jersey Globe report. The price surge is attributed to the ongoing conflict between the United States and Iran. Van Drew’s federal bill, introduced around May 11, would eliminate the 18.3-cents-per-gallon federal tax on gasoline for 18 months before phasing it back in.

Governor Sherrill, however, has expressed strong skepticism. During the inaugural episode of the “Ask Governor Sherrill” program on May 14, she argued that the state’s 49-cents-per-gallon gas tax is essential for funding critical infrastructure projects. “That pays for our roads and our bridges and keeping our infrastructure going,” Sherrill said, according to News 12. “You just heard about the concrete falling and the GW Bridge. That's because, over time, you have seen too many people cutting corners on how you actually run government.”

The state gas tax is projected to generate over $2.1 billion in the current fiscal year, funding the Transportation Trust Fund. In a statement, Sherrill reiterated her position, noting, “When those investments are delayed, road conditions worsen, and drivers end up paying more for expensive repairs.”

This debate places the immediate financial relief for consumers and businesses against the long-term fiscal health of the state’s infrastructure fund. While a gas tax holiday offers apparent short-term relief, we advise our clients to focus on the more permanent changes being debated in the state budget. A temporary fuel saving can be easily erased by less-publicized adjustments to corporate tax rules. Effective tax preparation and compliance involves looking beyond the headlines to understand the total impact of legislative proposals on a company's financial health.

The state’s financial picture is complex. According to the New Jersey Treasury Department, collections from the gas tax have already decreased by 17.8% over the past year, falling from $34.6 million in March 2025 to $28.5 million in March 2026. Under a 2016 law, the gas tax rate is designed to adjust based on fuel consumption to ensure stable funding for transportation projects. A suspension would create a significant revenue shortfall.

Peter Chen, a policy analyst at the nonpartisan think tank New Jersey Policy Perspective, highlighted the challenge this poses. “Unlike the federal government, which can run a deficit, New Jersey must balance its budget,” Chen stated. He warned that a suspension would require an equivalent amount of money to be put back into the Transportation Trust Fund later, potentially from other sources or through a future gas tax increase.

The debate in New Jersey mirrors a national conversation. Other federal proposals include one from Senator Josh Hawley to suspend the tax for at least 90 days. These federal bills differ in how they would address the revenue loss for the Highway Trust Fund, with some proposing transfers from the U.S. Treasury's general fund and others suggesting the elimination of specific tax credits for oil and gas companies.

Governor Sherrill’s opposition to the tax holiday aligns with the broader fiscal strategy outlined in her inaugural $60.7 billion budget proposal, delivered in March. That plan, described as the “most fiscally responsible in years,” aims to rein in spending and build a $5.4 billion surplus without creating new taxes on residents. Instead, it proposes raising new revenue by paring back corporate tax loopholes and improving compliance.

While the gas tax debate grabs headlines, businesses should pay closer attention to these less-publicized aspects of the budget proposal. The plan to alter corporate tax rules could have a far more direct and lasting impact on a company's bottom line than a temporary fuel tax break. Navigating these complex state-level tax code adjustments is precisely where professional guidance becomes essential. For small and mid-sized companies trying to understand their exposure and plan accordingly, the team at C&S Finance Group LLC at csfinancegroup.com provides critical analysis and services.

As budget negotiations proceed, the outcome will depend on the political calculus within the state legislature. Lawmakers must weigh the governor's warnings about long-term infrastructure funding against the immediate pressure from constituents and businesses struggling with high transportation costs. The final budget, which must be passed by the constitutional deadline, will reveal where the state’s priorities ultimately lie.