Gasoline prices have retreated below $3 for much of the state, but motorists will get little respite from lower prices because the state’s gas tax rate is set to rise again.
The Department of the Treasury announced Dec. 1 that New Jersey’s gas tax rate will rise by 4.2 cents per gallon on Jan. 1, 2026 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 fiscal year 2026 Highway Fuel Cap is set by statute at exactly $2.115 billion, which is 4.1% higher than the prior baseline level of $2.032 billion, and will increase each fiscal year, reaching $2.366 billion in fiscal year 2029.
“Due to the new statutory target, and because actual consumption has trended below last fiscal year’s levels, our analysis of the new formula dictates a 4.2 cent increase this coming January,” said State Treasurer Elizabeth Maher Muoio. “We emphasize that this dedicated funding stream continues to provide billions of dollars across the State to support our critical transportation infrastructure needs.”
There have been five rate increases, two rate decreases, and two years with no change since the annual rate adjustment calculation began in 2017.
Under Chapter 7, New Jersey’s TTF program is required to provide nearly $11 billion over five years to support 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 Petroleum Products Gross Receipt Tax.
Under the formula explicitly outlined in Chapter 7, the PPGRT rate will increase on Jan. 1, 2026, to 38.6 cents for gasoline from 34.4 cents and to 42.6 cents from 38.4 cents for diesel fuel. The website Kiplinger says New Jersey has among the 10 highest gas taxes in the country.
Consumption of gasoline and diesel fuel in Fiscal Year 2026 is projected to be 1.0 percent below fiscal year 2025 levels. As a result, the fiscal year 2026 PPGRT rate will be higher than in fiscal year 2025 because of the increased Highway Fuel Cap and declining consumption.
According to the website GasBuddy, as of Dec. 1, New Jersey had the 37th-most expensive gasoline per gallon among U.S., the District of Columbia and U.S. possessions at $3.02 a gallon.
