By Hilary Russ

NEW YORK (Reuters) - New Jersey's Democrat-led legislature passed a 23-cent gasoline tax hike on Friday to re-start the state's stalled transportation projects, sending the measure to Republican Governor Chris Christie for his expected signature.

The legislative package would increase the state's gas tax, which has not risen since 1988, to 37.5 cents per gallon. Christie and lawmakers struck a $16 billion deal on Sept. 30 to fund road, bridge and transit projects for eight years.

In exchange for the higher gas tax, the bills reduce the sales tax rate in phases and eliminate the estate tax, which now applies to estates valued over $675,000. The total tax cuts will ultimately cost the state $1.4 billion of revenue annually once fully implemented.


The hard-fought deal comes after months of talks and previous agreements that ultimately fell flat. In early July, Christie halted all but the most essential projects paid for with the state's Transportation Trust Fund, including $2.7 billion of NJ Transit projects.

The New Jersey Business & Industry Association, a trade group representing businesses in the state, hailed the deal as a step toward slowing the outmigration of companies and residents from New Jersey.

But the head of New Jersey Policy Perspective, a think-tank focused on the state's economy which on its website says it "has played an essential role in advancing progressive state policies," was harshly critical.

Gordon MacInnes, president of the think-tank, called the plan "absolutely toxic to New Jersey's future." While the gas tax increase was long overdue, he said in a statement, the companion tax cuts will lead to higher college costs, less property tax relief and higher transit fares for future generations.

(Reporting by Hilary Russ; Editing by Leslie Adler)

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