The Shumlin administration is proposing a 4 percent sales tax on gasoline, to raise $36.5 million in state funds and thereby avoid a potential $123 million in transportation budget cuts.
The suggestion, made to lawmakers by Agency of Transportation Secretary Brian Searles after Gov. Peter Shumlin’s budget address for 2013, undermines Shumlin’s oft-repeated pledge that he’ll refrain from raising broad-based taxes, considered generally as taxes levied on a broad cross-section of residents.
The 4 percent assessment on the retail price of gas could add up to 8 cents or more per gallon for drivers, at a benchmark retail price of $3.79 per gallon, though projections are preliminary at this point. The sales tax would be combined with a reduction from 19 cents/gallon to 14.3 cents/gallon on the state’s per gallon gas tax.
The new sales tax would increase automatically as the consumer price index rises.
Searles insisted after a Statehouse meeting that the new sales tax wouldn’t amount to a new broad-based tax, arguing that not all Vermonters drive, and that drivers consciously choose how much gas they consume.
“People have options; people have choices,” he said. “Clearly they’re exercising those choices, in choosing to carpool, choosing to use public transportation, choosing to operate more fuel-efficient vehicles.”
He described the new sales tax, which comes on top of a 2 percent gas sales tax to fund transportation infrastructure bonding (TIB) for major infrastructure projects, as “more of a user fee,” geared towards maintaining the state’s deteriorating highways, roads and bridges.
“So this is more of a replenishment. The governor spoke of a leaky bucket. That’s really what we’re talking about here: repairing that bucket and replenishing the money in there, which we need to maintain the system,” Searles said.
The tax proposal is important for policy reasons, as the state would likely cut $123 million from this year’s transportation budget if it doesn’t make up the $36.5 million shortfall.
Without the $36 million, the state would lose $40 million in potential federal highway funding this year alone, which would eventually translate into delayed repair of bridges hit by Tropical Storm Irene, as well as job losses of up to 3,400 annually, according to federal projections.
Searles told the House Transportation Committee that a similar $20 million shortfall last year was solved by imposing new fees at the Department of Motor Vehicles, alongside issuing $10 million worth of bonding.
But Searles warned that the state’s transportation funding woes are “structural, systemic and long-term” problems, which need to be dealt with decisively rather than kicked down the road for future politicians.
The basic causes for declining revenue into the transportation fund are an increase in fuel-efficient vehicles, and a decrease in gas consumption, with less miles driven statewide. Ironically, both are goals that the environmentally conscious Shumlin administration lauds.
Although the Shumlin administration previously hinted at raising the per gallon gas tax, which hasn’t been raised since 1997, it backed down from that option today.
Other options vetted by administration as alternatives to this gas tax include 15 other taxes and fees suggested in a January 2013 report, which highlighted the state’s annual $250 million shortfall in meeting infrastructure maintenance and repair costs.
These other options include taxing tires to a property tax on cars, among other measures.
House Transportation chair Rep. Patrick Brennan described the administration’s proposal as simply “a starting point” at this stage, arguing that the other alternatives outlined in the January study remained feasible and worthy of discussion.
He didn’t have a strong position on the proposal, but urged the public “not to panic” at the prospect of paying more at the pump.
“We’re not going to jump into anything irrationally here,” said Brennan after the meeting. Referring to a public hearing held two days ago to investigate high gas prices in northwestern Vermont, Brennan called it “ironical” that two days later the Legislature would consider a new gas tax.
“But it’s a necessity, and it all depends on what the public wants to enjoy for a driving experience in Vermont, too,” he added. “Twenty-three percent of our roads are in very poor condition still – we’d like to improve on that.”
“If the public thinks it’s OK the way it is, we cut projects and reduce paving. Some very painful things would have to happen if we didn’t raise revenues.”
Brennan cited the explanation he’d received from the Shumlin administration as to why the new suggestion didn’t amount to a broad-based tax. “The explanation I’ve gotten: You choose to drive,” he said. “It’s a luxury you have, it’s not a tax on a broad population, not everybody drives.”
Brennan acknowledged that it amounted to a new sales tax. Shumlin has previously been on record as defining broad-based taxes as sales, income, and rooms and meals taxes.
Rep. Duncan Kilmartin, R/D-Newport, who sits on the Transportation Committee, reacted more bluntly to the question of whether this measure amounted to a new broad-based tax.
Laughing, he said, “Of course it’s a broad-based tax. And it’s going to effect an increase. The figures are right there, how can you deny it?”
As for the administration’s position that only driving Vermonters would be affected, and choose their driving habits, Kilmartin added, “It’s a surreal statement. It has no basis in reality. No one can live in Vermont, outside of Chittenden County, and not drive, out of necessity.”
