Credit: (AP Photo/Jeff Chiu, File)

New Jersey policymakers last changed the state sales tax nearly a decade ago, but this year, the sales tax has become a flashpoint in the governor’s race.

The sales tax was the subject of a key question posed earlier this week during the first debate between the two major-party gubernatorial candidates.

A series of ads streaming online and over the airwaves in recent weeks have also centered on the sales tax.

But largely left out of these discussions is any of the key context about a tax that generates more than $14 billion annually for a state government with a nearly $60 billion annual budget.

The Democratic candidate in the governor’s race, Mikie Sherrill, a sitting congresswoman from Essex County, has portrayed the Republican candidate, Jack Ciattarelli, a former state lawmaker from Somerset County, as being open to a sales tax hike because of the way he discussed tax policy during an event earlier this year in Bergen County.

For his part, Ciattarelli’s campaign has accused Sherrill of misrepresenting his remarks, which came as part of a longer discussion about how another state he recently visited levies taxes, including by relying heavily on revenue from the sales tax.

But where New Jersey’s sales tax rate is currently set, and how that 6.625% rate falls nationally among U.S. states, has been mostly missing from the political back-and-forth.

In New Jersey, the sales tax rate itself is fixed in state law, unlike some other state taxes, such as the gas tax, which can fluctuate annually.

Meanwhile, provisions in the state Constitution make it clear that the governor cannot unilaterally raise or lower taxes, including the sales tax.

That’s an important point to keep in mind about taxes, in general, as the governor’s race intensifies toward the Nov. 4 election.

Instead, such tax policy changes must first be drafted and approved by lawmakers in both houses of the Legislature. Only then is a proposed rate hike or decrease sent to the governor for final approval.

And even when the governor and a majority of the Legislature are members of the same political party – as they are today – that doesn’t mean a governor’s preferred tax policy will make it to the finish line in Trenton

A clear example of the mechanics of these checks and balances played out earlier this year in the months that led up to the adoption of the state’s latest annual budget in late June.

At the time, Gov. Phil Murphy, a second-term Democrat, was seeking legislative approval for more than $1 billion in tax hikes to help support a record-high, nearly $60 billion spending proposal.

Among Murphy’s proposals was an expansion of the state sales tax. He didn’t ask lawmakers to change the tax rate itself. Instead, Murphy wanted more items to be taxed, including admission to participatory sports venues like batting cages and bowling.

But after Republicans lampooned Murphy’s sales-tax proposal as a “fun tax,” lawmakers ultimately rejected it. That, in turn, helped reduce the total amount of tax hikes that were incorporated by Murphy and Democratic legislative leaders into the final draft of the state’s fiscal year 2026 budget.

When it comes to the combined state and local sales taxes levied across the 50 states and Washington, D.C., New Jersey currently ranks 30th, according to an analysis published by the Tax Foundation, a nonpartisan group that closely tracks state and federal tax policy.

New Jersey’s sales tax rate was last adjusted in 2018, when the rate dropped from 6.875% to 6.625%. That culminated a two-step reduction authorized in a 2016 law enacted by then-Gov. Chris Christie under a broader deal with lawmakers that also involved hiking the gas tax and phasing out the estate tax.

The last time New Jersey’s sales tax was increased was in 2006, when then-Gov. Jon Corzine called for raising the rate from 6% to 7%, as part of a plan to repair state finances following years of heavy borrowing and overreliance on one-shot revenue gimmicks.

Corzine ultimately prevailed, but only after an impasse with lawmakers brought on a government shutdown that stretched into mid-July that year.

Murphy — who cannot run for re-election this year due to constitutional term limits — unsuccessfully sought to return the sales tax rate to 7% in 2018.

In New Jersey, the largest source of revenue for the state budget is not the sales tax. Instead, it’s the income tax, which uses a sliding scale of rates to raise more than $21 billion annually. To do so, those making more income annually are generally charged at a higher rate than those making less.

Revenue from New Jersey’s income tax is constitutionally dedicated to funding things like K-12 public education and direct property tax relief.

But the sales tax is the primary source of revenue for the budget’s general fund, which has traditionally been relied upon to pay for many other key programs and services, such as mass transit, health care and the pensions of many retired government workers.

Meanwhile, New Jersey has won praise from some groups that study tax policy for maintaining sales tax exemptions for necessity items, like clothing and groceries.

Analysts say these exemptions help make New Jersey’s sales tax less regressive, meaning it can lessen the burden from this tax on lower income families.

Murphy sought to hike taxes earlier this year as part of a plan to narrow a wide gap between how much state government spends each year and raises in annual tax revenues.

Still, under the current budget, the next governor will inherit a more than $1 billion structural imbalance.

On the debate stage earlier this week, the candidates were jointly asked whether they would commit to not hiking New Jersey’s sales tax.

In his response, Ciattarelli declared, “we are not raising the sales tax here in New Jersey.”

He went on to raise concerns about an “affordability crisis” in New Jersey, citing, among other things, a need to reduce income taxes, property taxes and energy costs, with the latter two examples not falling directly under the control of the governor.

For her part, Sherrill said she was “not going to commit to anything, right now, because I’m not just going to tell you whatever you want to hear.”

She went on to cite concerns about federal funding cuts enacted by Republican President Donald Trump that could exacerbate the state’s structural budget gap.