Say goodbye to the sales tax credit for purchasing electric vehicles in NJ

Over the next three years, New Jersey will phase out the sales tax exemption for people buying new and used electric cars, state officials said Tuesday alongside Gov. Phil Murphy’s state budget address.

New Jersey announced last year that all new car sales must be electric from 2035, a scheme that will be phased in from the end of 2026.

Murphy administration officials told reporters ahead of Tuesday afternoon’s budget speech that as the state works to end the sales tax exemption — which has been in place since 2004 — it will shift to prioritizing EV incentives.

  • MORE: Murphy unveils $56 billion NJ budget with new tax to fund NJ Transit, property tax credits, big spending on pensions and schools

Ending the sales tax exemption on electric vehicles over three years is also expected to generate about $70 million annually based on current estimates, administration officials noted.

Since 2004, New Jerseyans have been exempt from paying the 6.625% sales tax when purchasing, leasing and renting new or used all-electric vehicles, under the zero-emission light-duty vehicle tax credit. The exemption did not apply to plug-in hybrid cars.

The state’s ChargeUp program, which offers up to $4,000 in rebates to people in New Jersey who buy an electric car, will continue, but it’s unclear how much money the program will make available in this year’s budget. Approximately $30 million has been allocated to the program over the past three budget cycles.

While he did not specifically address changes to the electric vehicle tax credit, Murphy said Tuesday that “our budget will meet our responsibility to continue to confront one of the greatest threats to our state and our planet: the climate. change.”

When New Jersey joined several other states in enacting strict clean car regulations last fall, it pledged to start in 2026 as part of a larger effort to phase out gas-powered vehicles.

The Garden State will continue to allow the sale of used cars with internal combustion engines. Murphy, a Democrat who has pushed for the state to find ways to limit the effects of man-made climate change, has also emphasized that motorists will not be forced to buy electric or hybrid cars.

Advanced Clean Cars II, as the California-backed regulation is called, is a rule and not a law, meaning it could be overturned by a future administration.

Still, environmentalists have praised the regulations for the boon that zero-emission vehicles can bring to New Jersey, where 35% of greenhouse gas emissions are linked to transportation emissions. But critics, including business groups and some lawmakers, have criticized the speed of the rule, calling it unrealistic.

Last June, there were just over 123,000 electric vehicles on the road in New Jersey. That represents about 1.8% of light-duty vehicles on the roads in a state with about 6 million drivers, according to figures from the New Jersey Department of Environmental Protection and the state’s Motor Vehicle Commission.

State and federal incentives offer people who buy electric cars between $4,000 and $7,500. The average price for an electric car in June 2023 was higher than a gas car: $53,438 compared to $48,808, according to Cox Automotive.

The New Jersey Coalition of Automotive Retailers (NJCAR) said that by 2023, nearly 80% of auto sales were gas-powered vehicles, about 11% electric cars and about 9% hybrid or plug-in hybrid.

Chargers are a looming hurdle. EVAdoption, a market analysis service, found that as of September 2021, New Jersey had the sixth most cumulative electric vehicles in the US, but the worst ratio of electric vehicles to charging ports, at about 41 to 1.

It’s unclear how much money the state’s tax incentive program has saved New Jersey drivers over the past two decades.

But even as New Jersey offers additional incentives through rebates, more bumps in the state’s road to a clean transition seem inevitable.

A Rutgers University poll released last week found that half of New Jersey residents do not support plans to completely phase out the sale of new gas-powered vehicles by 2035. The dissent was largely due to finances, according to Rutgers’ Eagleton Institute of Politics. respondents tied up EVs.

Ashley Koning, an assistant research professor at Rutgers, said the problem of declining support is “an issue that is heavily influenced not only by partisanship, but also by a hesitancy that likely stems from a widespread lack of information about the vehicles themselves and what the policy is.” entails.”

And despite opposition, 58% of respondents said they thought ACCII would have a positive impact on the state’s air quality and 51% thought it would be positive for residents’ health.

Reports are circulating nationally that the Environmental Protection Agency (EPA) could delay tailpipe emissions rules aimed at accelerating the nation’s transition to electric vehicles, amid slower electric vehicle sales and access to public chargers.

Business organizers with NJCAR, a nonprofit organization serving more than 500 car and truck dealers in the state, emphasize that drivers should have access to a wide choice of vehicles and that more electric vehicles hitting the road in New Jersey should happen organically – and not as part of a state mandate.

NJ Advance Media Staff Writers Susan K. Livio And Brent Johnson contributed to this report.

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Steven Rodas can be reached at srodas@njadvancemedia.com. Follow him on X @stevenrodasnj.

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