Over the next three years, New Jersey will phase out a sales tax waiver for people buying new and used electric cars, state officials said alongside Gov. Phil Murphy’s state budget address Tuesday.
New Jersey last year announced all new car sales must be electric starting in 2035, a regulation that will be phased in starting toward the end of 2026.
Murphy administration officials told reporters prior to Tuesday afternoon’s budget address that as the state works to end the sales tax break — which has been in place since 2004 — it will shift toward prioritizing EV incentives.
Ending the sales tax waiver on electric vehicles over three years is also expected to net about $70 million a year based on current estimates, administration officials noted.
Since 2004, New Jerseyans were exempt from paying the 6.625% sales tax when buying, leasing and renting new or used fully electric vehicles, based on the zero-emission light duty vehicle tax break. The exemption did not apply to plug-in hybrid cars.
The state’s ChargeUp program, which provides up to $4,000 in rebates for people in New Jersey buying an electric car, will continue, but it’s unclear how much money the program will make available in this year’s budget. About $30 million has been earmarked for the program over the past three budget cycles.
Although he did not specifically address changes in the EV sales tax break, Murphy said Tuesday, “with our budget, we will ... live up to our responsibility to continue confronting one of the largest threats to our state and to our planet: climate change.”
When New Jersey joined several other states by installing the strict clean car regulation last fall, it committed to starting in 2026 as part of a larger effort to phase out gas-powered vehicles.
The Garden State will continue to allow used cars powered by internal combustion engines to be sold. Murphy, a Democrat who has pushed for the state to find ways to cull the impact of human-caused climate change, has also emphasized that drivers will not be forced to purchase electric or hybrid cars.
Advanced Clean Cars II, as the regulation helmed by California is known, is a rule, not a law which means it can be overturned by a future administration.
Still, environmentalists have celebrated the regulation for the boon zero-emission vehicles can provide to New Jersey, where 35% of greenhouse gas emissions are linked to transportation emissions. But critics, including business groups and some lawmakers, have been critical of the speed of the rule and have called it unrealistic.
As of last June, there were just over 123,000 electric vehicles on the road in New Jersey. That represents just about 1.8% of the light-duty vehicles on the roads in a state with about 6 million drivers, according to figures provided by the New Jersey Department of Environmental Protection and the state’s Motor Vehicle Commission.
State and federal incentives provide people buying electric cars between $4,000 and $7,500. The average price for an electric car in June 2023 was higher than a gas-powered car — $53,438 compared to $48,808, according to Cox Automotive.
The New Jersey Coalition of Automotive Retailers (NJCAR) said in 2023 nearly 80% of car sales were gas-powered vehicles, about 11% were electric cars and roughly 9% were hybrid or plug-in hybrid.
Chargers present 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 U.S. but the worst ratio of EVs to charger 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 if New Jersey provides added incentives via rebates, more bumps in the road to the state’s clean transition seem inevitable.
A Rutgers University poll released last week found half of New Jersey residents do not support plans to phase out the sale of new gas-powered vehicles completely by 2035. The dissent, the Eagleton Institute of Politics at Rutgers said, was largely due to the finances respondents tied EVs to.
Ashley Koning, an assistant research professor at Rutgers, said the problem of waning support was “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 entails.”
And despite opposition, 58% of those polled said they felt ACCII would have a positive impact on the state’s air quality and 51% felt it would be positive for residents’ health.
On a national level, reports have circulated that the Environmental Protection Agency (EPA) could delay tailpipe emissions rules designed to speed the country’s move toward electric vehicles amid slower EV sales and public charger access.
Business organizers with NJCAR, a non-profit organization that serves more than 500 car and truck dealerships in the state, emphasize that drivers should have access to ample vehicle choice and more electric vehicles hitting the road in New Jersey should happen organically — not as part of a state mandate.
NJ Advance Media staff writers Susan K. Livio and Brent Johnson contributed to this report.
Stories by Steven Rodas
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Steven Rodas may be reached at srodas@njadvancemedia.com. Follow him on X at @stevenrodasnj.