By Leslie Brody and Josh Barbanel 

Republican Gov. Chris Christie reached a sweeping deal with Democratic legislative leaders Friday that would boost gasoline taxes by 23 cents a gallon while cutting sales taxes and eventually eliminating the state's estate tax altogether.

He said all the additional gas-tax revenue would go toward fixing the state's roads and bridges.

The agreement still needs the approval of both houses of the Legislature but it signals what is likely to be a significant shift in the state's tax system and a step toward fixing the state's infrastructure. It would result in a $2 billion a year reauthorization of the Transportation Trust Fund, which funds highway repairs and provides capital funding for the NJ Transit rail system over the next eight years.

Political observers said it was no coincidence the deal came a day after an NJ Transit train crashed into the Hoboken terminal. Causes of the crash are still under investigation. A state Department of Transportation commissioner wrote a column saying, "It is irresponsible for anyone to suggest possible causes, let alone suggest safety-related or routine maintenance projects at the station or approaching the station were affected by the shutdown of Transportation Trust Fund (TTF) financing."

Mr. Christie, Democratic Senate President Stephen Sweeney, and Democratic Assembly Speaker Vincent Prieto have spent months sparring over the infrastructure-funding issue. Many commuters had been frustrated by the impasse, especially after the governor ordered a shutdown of nonessential transit projects including road work when the trust fund authorization expired June 30.

Mr. Christie's office said the deal also phases out the estate tax over the next 15 months. It cuts the sales tax, currently 7%, to 6.875% in January, and down to 6.625% in 2018. The deal also increases tax credits for the working poor, and creates a personal income tax exemption for honorably discharged veterans.

Mr. Christie called the deal the "first broad-based tax cut" for all New Jerseyans since 1994. His office estimated the gas tax increase would cost the average resident between $186 and $276 a year, but said the other tax cuts would more than offset that.

The current gasoline tax at the pump in New Jersey is 32.9 cents a gallon, the second lowest in the nation after Alaska, according to the American Petroleum Institute. That total includes 14.5 cents in state taxes and 18.4 cents in federal taxes.

Mike Anderson, a financial trader who lives in Hawthorne, N.J., was shocked by the prospect of higher gas taxes. "It means the price of gas went up by 15% in one day. That's ridiculous," he said. Mr. Anderson added that he just moved to New Jersey from New York over the summer. "I think I'd rather now live in New York, " he said.

Mr. Prieto, the Assembly speaker, said the compromise would put road work back on track.

Mr. Sweeney, the Senate president, said the deal would boost the economy, bring investment into the state, and allow work on the light-rail projects in Bergen, Hudson and Camden counties.

The question of how to fund road and bridge repairs has figured in some of the pivotal decisions of Mr. Christie's governorship. When the governor canceled a planned NJ Transit rail tunnel under the Hudson River to Manhattan, citing rising cost estimates, critics accused the administration of doing so in order to replenish the highway fund without having to take the politically risky step of raising the gas tax. Mr. Christie defended the cancellation on the merits.

Tom Wright, president of the Regional Plan Association, a think-tank that deals with infrastructure issues in the metropolitan region, called the tax deal reached Friday "huge."

"It never should have taken this long," he said, noting that critical project were put on hold in a state that relies on its ports and transit systems for commerce. "Cutting funds for its infrastructure projects was going to kill the state in the long term."

He noted that New Jersey will still have lower gas prices than neighbors, and much of the tax will be paid by out-of-state drives traveling through.

--Charles Passy and Ted Mann contributed to this article.

Write to Leslie Brody at leslie.brody@wsj.com and Josh Barbanel at josh.barbanel@wsj.com

(END) Dow Jones Newswires

September 30, 2016 20:46 ET (00:46 GMT)