Margolis: “Prius Tax,” rebuffed in the House, has support in the Senate

Sen. Richard Mazza, D-Chittenden-Grand Isle, chairs the Senate Transportation Committee. Photo by Anne Galloway

Sen. Richard Mazza, D-Chittenden-Grand Isle, chairs the Senate Transportation Committee. Photo by Roger Crowley

John Margolis is VTDigger’s political columnist.

Get ready for the Prius Tax.

Well, it’s not really a tax, it isn’t just about the Prius, and immediate preparation is not necessary. The Prius Tax, by that or any other name, is not imminent.

But considering the bipartisan (though hardly unanimous) approval of the suggestion rattling around the Statehouse last week, it could be coming, perhaps sooner rather than later.

What is it?

It’s a proposal to raise the auto registration fees on all those vehicles that use little or no gasoline, and therefore pay little or no gasoline tax. That means they make no (or paltry) contributions to the Transportation Fund, which is now so starved for cash that lawmakers are on the verge of raising the gas tax by … well, by almost 7 cents a gallon now but primed to go up automatically as fuel prices rise.

And as the legislators know, the Transportation Fund’s troubles have barely begun. As cars get more fuel efficient and more drivers opt for hybrids like the Toyota Prius or all-electric vehicles like the Chevrolet Volt, gas tax revenues are likely to decline even more.

Or, as Transportation Secretary Brian Searles put it, “The gas tax is not the future.”

Those Priuses, Volts and trucks burning natural gas add to the wear and tear of roads and bridges just as other vehicles do, but contribute little or nothing to the fund that builds, fixes and maintains those facilities.

Hence the idea that those who pay less at the pump should pay more when they register their vehicles.

House Republicans actually proposed an amendment to the $657 million transportation budget Wednesday to charge an extra $146 a year to register a “specialized fuel driven motor vehicle.”

As an amendment, it was a complete fizzle, attracting only 34 votes of the 140 members in the chamber. No surprise; an overwhelmingly Democratic House is not likely to accept a untested Republican amendment.

But the idea survives, with interest from key Democrats, including House Speaker Shap Smith.

“We’re going to have to look at it,” Smith said. “There are definitely vehicles that are not participating in paying for our roads and bridges.”

Sen. Richard Mazza, the Democrat who chairs the Senate Transportation Committee, also said he was “interested in it, because we have to be interested in it.”

The idea of charging higher fees for some cars did not burst out of the blue last week. Neither did that $146 figure. They both come from earlier Transportation Agency planning documents, including a study done for the Transportation Agency last year by the Vermont Energy Investment Corp. of Burlington.

Mazza said he thought that within 10 years roughly 25 percent of all trucks in the country would be fueled by either compressed or liquefied natural gas.

“That’s a bigger threat to (gas tax) revenues than the hybrid or electric cars,” he said. “That will really dig into our diesel (tax revenue).”

Sen. Richard Westman, the Republican who is on the Senate Transportation Committee, said like most states, Vermont has for years supported transportation as “a user system,” and increasing registration fees for electric cars and hybrids would be consistent with that policy.

There is also, he said, an equity aspect to the discussion. It’s middle- and lower-income drivers who “can’t afford to move over to the alternatives” who pay gas taxes that “can be very regressive,” Westman said. The Priuses (Toyota seems really to prefer ‘Prii’ as the plural) and Volts cost roughly $40,000, and some all-electric vehicles are more expensive, putting them out of reach for many buyers.

The idea of charging higher fees for some cars did not burst out of the blue last week. Neither did that $146 figure. They both come from earlier Transportation Agency planning documents, including a study done for the Transportation Agency last year by the Vermont Energy Investment Corp. of Burlington.

That study analyzed the pros and cons of several “alternative fuel vehicle user fee options.”

One was a “revenue neutral” $146 added fee for some cars, that being how much a typical Vermont auto pays in gas taxes each year. Another was a “vehicle miles traveled fee” assessed on each vehicle based on how many miles it traveled.

But measuring how far every car in the state traveled per year would require a mechanism that could be both expensive and intrusive, “raising privacy concerns,” the report said. If anything, that phrase seems to understate legislative distaste for that option. Transportation Committee Chairman Mazza said he would never consider it.

The sudden interest in raising some registration is not likely to stave off higher gas taxes, which Mazza said are “inevitable” this year. The registration fee increase idea is just that – a general idea, not a specific proposal. Legislators – and perhaps legislative staff – would have to answer several questions before the idea could become a bill. Would all-electric vehicles and hybrids pay the same fee? Or would there be a sliding scale? How would natural gas-fueled vehicles fit in?

One advocate who likes the idea is Joseph Choquette, the lobbyist for the Vermont Petroleum Association, who is still fighting the gas tax increase.

“It’s a more balanced approach,” said Choquette, who fears that the higher gas taxes would mean less business for service station owners near the border of New Hampshire, where gasoline taxes – and hence prices – are already lower than they are in Vermont.

There is, of course, one disadvantage to raising the registration fee for electric and hybrid vehicles: It’s a disincentive to buy one. Considering that both the state and federal governments have been creating incentives to buy the vehicles for years, there’s a certain inconsistency there, as acknowledged by Secretary Searles, who said, “We’ve been trying to promote the purchase and use of electric and hybrid vehicles.”

House Natural Resources Committee Chair Tony Klein agreed.

“Usually you tax the things you don’t want people to do,” Klein said. The “owners of these cars are not going be contributing as much to the gas tax,” but he still considered raising registration fees on more fuel-efficient vehicles “a little misguided.”

Eventually, he said, the whole country is likely to “move off fossil fuel for our transportation.” Meanwhile with more electric cars and hybrids being produced, their prices are coming down toward the range of “most car buyers,” and now that they’ve been on the market for several years, “Who knows? There are probably Prius beaters around.”

As proposed, though, the higher fees would not seem to take away much of the incentive for buying a Prius or other ultra fuel-efficient car. A Prius, which uses gasoline to supplement its electric motor, gets about 45 miles to a gallon. Assuming 15,000 miles of driving a year, that’s about $1,000 less in fuel costs than a car averaging 25 miles a gallon. And if the price of gasoline continues to rise, that spread would grow.

Searles said one reason the agency did not propose raising fees this year was that there are not enough hybrid, all-electric, or natural gas vehicles in the state to bring in much revenue.

“But we have to look to the future and ask how are these vehicles going to pay for their use of the system,” Searles said. “It’s a serious question and what we do support is a discussion that will continue throughout the legislative session.”

Jon Margolis

Comments

  1. Brian Flynn :

    I can barely wait for the next idea these rocket scientists,sorry legislators float. Why not tax Vermonters who do not drive? After all they pay no vehicle registration fees and no gasoline state tax?

    Brian Flynn
    Craftsbury Common, Vt

  2. Moshe Braner :

    What an obscene idea. They want to charge everybody the same as they would have paid in gas tax on a guzzler that’s driven a huge number of miles? $146 equates to the current gas tax for 15,000 miles in a 21 mpg vehicle. What ever happened to personal responsibility? If one choose to guzzle gas, it’s going to be expensive, even if there was no gas tax.

    Everybody, no matter their income, who buys a car has the choice to buy an economical one. There are many cheap cars that get good mileage. They are small, of course, still gets you from point A to point B. Hybrids cost a bit more, albeit not more than a big truck or SUV.

    • Stuart Hill :

      A great many working class people I know are limited by what they can afford to spend on a car. A 15 year old Civic might still get better mileage than a 10 year old Buick for the same money but the cost of maintaining it is going to be higher just for the age let alone the higher cost of parts.

      As a local mechanic used to say, gas is the cheapest thing you put in your car.

      Yes it would be lovely if we all had the option of driving a vehicle that got 50 MPG. Economics and logistics don’t allow that to happen though. Not all of us have the option of spending that extra coin on “showing we love the earth”

      I know a great many men and women living one paycheck to the next. Their budget determines what they drive. Not desire. Not political correctness.

  3. Moshe Braner :

    I should add that hybrid cars such as the Prius (but not “plug in hybrids”) run purely on gasoline. They convert some of the energy from the gasoline engine into electricity and then later back into motion, but all that energy started out as electricity. It’s all to increase efficiency. To tax that, and not a gasoline car that is efficient by other methods, is inconsistent. So, e.g., if I were to get a 20-year-old Geo Metro, which gets 50 mpg thanks solely to being tiny, should I pay that $146 annual fine?

    • Moshe Braner :

      Oops, I meant of course to write: “but all that energy started out as gasoline”.

  4. Roy Moss :

    Our legislators profess to be really concerned about out carbon footprint until it cuts into revenues. This is a pretty good indication why public transportation options in Vermont leave something to be desired.

  5. Steven Smith :

    My prius in 2004 cost about $6000 more than a comparable standard mileage car. I paid the state purchase and use tax on that extra $6000 at the time. That should be balanced off against the tax on the 2000 gallons not bought over the life of the car.

    I have no objection to paying my fair share for road upkeep, but I’d like it calculated accurately.

  6. This reminds me of the proposed and absurd opt out fee to avoid having a smart meter. Why tax somebody for choosing a car or electric meter with fewer emissions? That’s a good thing!

  7. Aula DeWitt :

    All other arguements aside it is noted that the State is also missing the fuel tax from folks who drive Prii and other ‘green’ vehicles on Vermont roads but who’s vehicles are not registered in Vermont.

    And, for those of you who missed it, a study on the ability of the middle class to buy *new* cars was recently reported upon. This study documents that purchase of *any* new car by someone making the median income of that area is more and more out of reach. The study further notes that the recent rise in the marketing of ‘pre-owned’ vehicles of four to six years old [or so] is geared directly at those of us who make the median income or lower. New car ownership is more and more becoming something only those with better than average inccome may enjoy.

    • Moshe Braner :

      I bought my 2001 Prius for about $6500 – in 2011. I’ve bought several used cars over the years, never a new one, and most were economical models. People make their choices, at all price levels.

      It is true though that a decade ago you could get a used but usable small car for $1000, but things changed after the price of oil took off. The price of used SUVs collapsed and the price of small used cars became much higher than it used to be.

      But get used to it, since the era of cheap oil is permanently over, despite all the hype about fracking. Those who cling to the old lifestyles, living far from everything and driving a large vehicle, have and will find it difficult to pay for. We’ll have to change that mindset, whether we like it or not. “Unsustainable” means “cannot be sustained”.

      One more fact: the damage inflicted to the roadbed is proportional to the vehicle (axle) weight to the fourth power. (See for example http://en.wikipedia.org/wiki/Gross_axle_weight_rating ) That means that a 4000 pound light truck or SUV causes 16 times more damage than a 2000-pound small car. (2x the weight, the 4th power is 2x2x2x2.) And since I drive my car half as many miles as the average, that’s 32 times less damage. So to suggest that I pay as much as the “typical” vehicle is unjust, and also contrary to the stated policy of encouraging conservation.

      • ALEX BARNHAM :

        Overloaded trucks will do the most damage to roadbeds…one can see the roads literally splitting open and water then gets under the overcoat and freezes in large pockets causing tremendous damage. Does the DOT ask to increase the fines and controls? No. The suggestion to increase the taxes on the ones who do the least damage is typical of failed governance. Are the roads constructed to last? Not many. They last maybe long enough to make it seem like the builders are not responsible and then, more money is made by the builders because PARTS of the roadbed break up and therefore the entire roadbed must be replaced. How convenient.

  8. Moshe Braner :

    I live on a dirt road myself and drive a small car (carefully). I know people who live in rural parts of the state (Brookfield, Cabot, etc) and drive small cars. And there are intermediate choices between 2000 pound low-clearance econo-box and 6000-pound land-yacht.

    And people who say they “cannot afford”, e.g., another 7 cents a gallon in gas tax, but can “only afford” a guzzler that’ll cost them double the gallons at $4 each, well, I don’t understand that.

  9. Roger Sposta :

    Steve Smith is right. I, too paid a “Prii” tax when I bought mine last year. An extra $6-9,000 in price was a price I was comfortable with, given the savings in the long run, even w/ a bit higher payments. The taxes I paid at purchase more than make up for a “use tax” or higher gas tax. To turn around a say that it’s because those of us who want a “green car” that the roads are in bad shape and we can’t afford to fix them is BS.

  10. Dan Luneau :

    I am a Toyota dealer in St Albans and obviously sell Prius family products. Mr Smith is correct about the extra purchase and use tax paid by a consumer when they buy a Prius. Also, when a used Prius is sold, it also sells for a premium over a non hybrid vehicle thus again the state collects the extra tax on the transaction. That said, the state has to find a way to collect the funds necessary to maintain our roads, etc but they must craft a way that is equitable and “does not” disincentivise consumers from buying no and low carbon emitting vehicles. To do so is the exact opposite of what Vermonters are working so hard to accomplish in our quest to cut our carbon foot print down to sustainable levels.
    Members of them senate and house need to come together and figure this out but in doing so remover, encouraging Vermonters to by no, low carbon emitting vehicles is equally as important as the task of raising the funds necessary to maintain our roads, etc..

    • Lee Stirling :

      I completely agree with your sentiments about the need to accurately determine the true cost of these fuel-efficient hybrids. But I would like to know whether those people who bought Prii over the various years since it first became a mainstream vehicle were able to take advantage of Federal or State tax credits as a result of the purchase. The $4000-6000 price premium paid on the car at purchase were, in many cases, mitigated by these tax credits come the following April 15th.

  11. Barbara Morrow :

    This is an example of entrenched thinking. First, a Prius and lots of other modern cars are light on the road; heavy trucks are the major cause of damage to roads (aside from just “winter.”) This truck traffic should be driven over to trains. Alas, since the truck lobby is bigger and better than the Prius lobby, you can see where this will go.

    As well, we should explore other ways to support our infrastructure than from a dwindling gas tax.

  12. John Greenberg :

    I haven’t seen anyone make the following point. (FULL DISCLOSURE: We are a 2 Prius family).

    Mileage driven is but a crude way of assessing the contribution a vehicle makes to the need for repairs on roads and bridges. A mile driven by a heavy truck creates a lot more damage to our highways and bridges than a light fuel efficient vehicle like a Chevy Volt or a Prius. Since fuel efficiency is at least partially proportional to the weight moved, lighter cars are likely to get greater fuel efficiency AND cause less damage than heavier ones. In other words, while they pay less in gas taxes, they also create less cost in road maintenance and repairs.

    In addition, as Tony Klein and others suggest, in a world with all kinds of pollution problems caused by producing and burning fossil fuels, not to mention global climate change, it would be really counterproductive public policy to discourage fuel efficiency by penalizing it in the tax system.

    A final note. In all of the discussions that I’ve seen so far of the gas tax, it appears to be assumed that raising gas taxes mean that people will actually pay more for gas. But if the premise of this discussion — namely, that people are consuming less gas because cars are more efficient — is true, that’s a false inference. To find out whether the new tax will cost more, you need to multiply the higher price for gasoline against the LOWER number of gallons purchased. The cost to drivers is the product of 2 numbers, not just the result of changing one of them.

    Indeed, it’s this very math which will ENCOURAGE drivers to CONTINUE buying fuel efficient cars. And yes, over time, that will mean even higher gas taxes if the same trends pertain. But there’s really nothing wrong with having to raise taxes even more at some future point in time, if cars become even more fuel efficient. European economies have flourished for years with gas price which are multiples of ours.

    • ALEX BARNHAM :

      Higher gasoline prices brings foreclosure to inefficient vehicles.

    • krister adams :

      “In addition, as Tony Klein and others suggest, in a world with all kinds of pollution problems caused by producing and burning fossil fuels, not to mention global climate change, it would be really counterproductive public policy to discourage fuel efficiency by penalizing it in the tax system.”

      Right on. This (proposed) tax is absurd.

  13. Mike Kerin :

    This idea is just plain stupid.Taxing people for saving gas ? Come on lets find a way to be fair to people who are trying to do the right thing.

    • John Jacob :

      You are actually being taxed for your use of the road. In the past this was covered by the gas tax, since your vehicle efficiency has increased the amount of gas tax you pay is lower, thus you should pay more to register your vehicle.

      • Mike Kerin :

        I still buy gas and I drive about 8000 miles a year. Not causing a lot of wear and tear on the roads and bridges.
        Try taxing the big rigs that tear up the roads.

  14. Sally Shaw :

    On the other hand, rather than de-incentivising those who want (responsibly) and are able (financially) to reduce their carbon footprint, why not double-tax the Gas Guzzler that is destroying the planet at an alarming rate–gas tax plus “carbon offset” tax for the difference between what that Guzzler and a Prius would spew over the same number of miles. Exemption for farms, people who work in the woods, carpenters, and others who actually need a truck. Tax those who only THINK they need to drive to the grocery store in a monster truck or Hummer.

    • John Jacob :

      Lawmakers seek to enact taxes that can be collected without 6000 loopholes.

      Do you have any idea what it takes to create the battery in an EV? Just as bad for the environment as carbon emission, but since its happening in China and NIMBY people seem to sweep it under the rug.

      • ALEX BARNHAM :

        Chinese mining Afghan lithium.

  15. In Europe, new vehicles are taxed on a formula covering weight, power, mileage and sales price.

    The pump gasoline price includes 70% as various taxes.

    People end up driving small, fuel-efficient vehicles.

    Detroit is learning how to build competitive small vehicles.

    On a life cycle basis, EV and hybrid vehicles do not reduce CO2 emissions as much as high mileage vehicles rated EPA Combined 38 MPG or better.

    http://theenergycollective.com/willem-post/171561/co2-emissions-and-chevy-volt-vs-honda-civic-ex-l
    http://theenergycollective.com/willem-post/184756/plug-hybrid-mileage-overstated-epa

    • John Jacobs :

      Try driving a small, efficient vehicle on a snowy dirt road and get back to me.

      • John Greenberg :

        I do it every time I leave the house in winter. Have since 2007. Ditto mud season (far more of a problem). Never been stuck.

        • Moshe Braner :

          Ditto, since 1992.

          • ALEX BARNHAM :

            Doth a Subaru Outback qualify as a small, efficient vehicle? I get 34 mpg with mine and sometimes 106 going downhill.

  16. Barbara Morrow :

    You’d have to define Gas Guzzler carefully. Lots of po’ fo’k cannot afford a later model car, certainly nothing like even a used Prii, and end up with our cast off Guzzlers. Since there is virtually NO public transportation in many rural parts of the state, (I’d say MOST parts), this tax would fall on those least able to pay it.

    I’m liking the European calculation. Let’s play with that.

  17. Nicholas Bartenhagen, :

    A Government Accounting Office study determined that the physical damage inflicted on the nation’s roads exponentially (not linearly) increases with the weight of the vehicle. For example, if one compares an auto with a curb weight of approximately 6,000 lbs (a GMC Yukon or a Dodge Ram) with one weighing half as much (a Prius or Honda Civic, the road damage inflicted by the former is not twice as much, but four times as much as the latter, given equidistant road travel per year.

    Another study calculated that a single 40-ton 18-wheeler does as much damage to our highways as 9,600. Forty tons happens to be the weight limit for nearly all interstate highways.

    Many states (does that include Vermont?) allow heavier loads to traverse its highways if the trucker or his corporate employer pays an additional fee. Is there any evidence that the cumulative annual fees collected adequately compensates for the cumulative annual highway damage inflicted by these heavier trucks?

  18. Nicholas Bartenhagen, :

    Correction
    Another study calculated that a single 40-ton 18-wheeler does as much damage to our highways as 9,600.
    Should read:
    Another study calculated that a single 40-ton 18-wheeler does as much damage to our highways as 9,600 autos.

    • Moshe Braner :

      It’s not “exponential”, but it’s to the fourth power as I mentioned above. So, e.g., a 40-ton (80,000 pound) 18-wheeler, with 5 axles, is 16,000 pounds per axle. A 3200-pound (mid-size) auto with two axles is 1600 pounds per axle, or 10 times lighter. Ten to the fourth power is 10,000, which agrees with the 9,600 number you quoted.

      And yes this is a reason why we should divert some of the diesel taxes to upgrade the railroads. The US used to have the world’s biggest and best railroad system, up until the 1950’s. Letting it decay was a major mistake. The policies that charge the railroads property taxes while we subsidize the highways are going to destroy our economy. Cheap oil is gone! Think fracked oil from ND is going to save us? Then tell me why 2012 saw the highest ever (annual average) prices for oil and fuels made from oil.

      • Stuart Hill :

        The rise in oil prices was driven by speculations in the commodities market, not by supply and demand.

  19. Alan Taplow :

    This is about the dumbest proposal I’ve seen. We are supposed to be encouraging people to put less pollution up into the atmosphere, not making it more difficult.

    Perhaps you will need to make some road maintenance part of general taxes rather than the tax on gasoline.

  20. Tony Lolli :

    What is the matter with these folks? Instead of more taxes, why not budget reductions?

    • Joe Sullivan :

      One can only cut so much. I know this is not a business, however when a company needs to make ends meet the other concept it growth and expansion; We cannot keep cutting ourselves out of things.

  21. ALEX BARNHAM :

    If you really want to know what is the culprit of all of this nonsense, WASTE is how you spell it. Take a look at the documentary entitled “DIVE” and you will get a good picture of why we are running out of oil and why the wool is still so tightly knitted over our eyes. The more we waste, the quicker we run into the stone wall of class warfare.

  22. Aula DeWitt :

    I would like to suggest that this conversation is becoming mired in a discussion of a tiny piece of the puzzle, just as other discussions in the state house are. The puzzle is how to pay for the things government wants to spend on. This includes infrastructure and services in a large part.

    Our elected officials are doing what is being echoed here: continuing to do what we’ve always done, which is tax this and that and the other thing to make enough money. Eventually the taxes become pervasive and steadily increase as they seek more things to tax in order to raise the funds desired.

    It is time to get out of the box and be brave enough to truly examine the alternative tax methods and then pick one and get rid of this nickle and diming of the tax payers. There have been some very interesting ideas floated for at least twenty years now, including the tax on electronic transfers, and the flat tax, to mention a few. Both of those methods are sensitive to the income of those taxed and appear to be a way to increase revenues while decreasing the economic impact on the populace.

    What can we do to encourage our elected officials to get out of the box and think outside of it.

  23. Joe Sullivan :

    Full support. Everyone is in it together.

  24. Bruce Alvarez :

    Does:
    “The Priuses (Toyota seems really to prefer ‘Prii’ as the plural) and Volts cost roughly $40,000″

    mean the author thinks a Prius costs $40K? If so, some research is needed. You can get almost that high in a plug-in Prius but not a “regular” Prius, they start at about $24K.

    With regard to Prii vs Priuses – Prius is Latin; it means “prior or formerly” though another definition is “to go before”. Prii would be the proper conjugation based on the language though I wonder about the plural of something that is not a noun.

    One 80,000 pound 18 wheeler causes damage equivalent to 12,000 cars. What is the “road wear” registration tax on them?

    Road wear increases with the fourth power of vehicle weight. Why should a 3,000 pound Prius have the same (or higher) registration tax (presumably related to road wear) than:
    – A 5,000 to 5,800 pound, F-150, Cadillac Escalade, Nissan Armada or Lincoln Navigator?

    The damage is nearly 16X that of a 3,000 pound car. As horrible as their mileage is, they use ‘only’ 3X the amount of gas per mile so they are not even close to covering their wear based on paying more taxes on the fuel they use. Their “road wear” tax should be over 5X that of a Prius and 8X that of a 3,000 pound “average MPG” car.

    – Cars and trucks with studded tires?

    Most roads in the state are kept ice free 99%+ of the winter but studded tires rip up the road with every rotation. Shouldn’t vehicles with studded tires be charged a HIGHER fee – including vehicle weight in the calculation? They are clearly causing significantly more damage to the roads than other vehicles. Most New England states limit the uses of studded tires to November through April (or less). Not Vermont, you can run them year round if you like.

    • Bruce,

      There should be a separate charge called Road Damage Fee, RDF. It would be based on the fourth power of axle weight.

      Here is a sample calculation of what the RDF fees should be for a standard car and for a heavy truck.

      – Standard car, 3200 lbs, 2 axles, 1600 lb/axle, RDF $10/year, for “convenience”, tacked onto annual registration fee.

      500,000 cars x $10/car/yr = $5 million/yr

      – Heavy truck, 80000 lb, 5 axles, 16000 lb/axle, RDF $50,000/year*

      2000 heavy trucks x $100,000/truck/yr = $200 million/yr

      *16000/1600 = 10 to the fourth power = 10,000.

      The RDF would raise enough funds for the annual repairing/rebuilding of roads in Vermont.

      The heavier trucks are damaging the roads without paying for the damage.

      If they were properly charged, truck traffic and its pollution would decline and rail traffic would increase.

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