Shumlin administration officials told the House Transportation Committee on Wednesday that they have no alternative for a proposed 4 percent sales tax on gas, which would generate $36.5 million in transportation revenue and sidestep a loss of $40 million in federal funds.
Leonard LeBlanc, the state’s transportation finance director, told lawmakers the administration doesn’t have a Plan B. “We continue to support this proposal,” LeBlanc said. “The challenge for a back-up plan rests with the Legislature.”
Chris Cole, the Agency of Transportation’s policy director, said the administration favors the new sales tax because it balances a 4.7 cent cut to the excise gas tax. The combination creates more stable revenue streams as gas prices fluctuate, he said.
As more Vermonters conserve fuel by driving more efficient cars, using mass transit and sharing rides, the gas tax has become a less reliable source of state transportation revenue at a time when the state needs to make heavy investments in bridge and road repairs. A recent report predicts the average gap between the state’s annual funding sources and the cost of paying for basic infrastructure needs is $250 million a year.
Cole cautioned that the gas tax fix, which needs to be in place before September this year, won’t be a permanent solution. The new revenue stream will buy time, he said, as transportation funding dilemmas are worked out at the federal level.
House Transportation chair Rep. Pat Brennan, R-Colchester, maintains that all options remain on the table.
“This isn’t a cast-in-stone proposal,” Brennan said, after a committee meeting on Wednesday. Musing on alternatives, he said, “I think the most appealing to me, and maybe the traveling public out there, would be a recapturing of the one-third purchase and use [tax] that goes to the education fund currently, which equates to about $29 million a year.”
That shift, along with tying the gas tax to a yearly inflation index, would fill the gap, Brennan said. The federal gas tax hasn’t increased since 1993, even as the costs of maintaining transportation infrastructure have risen steeply.
Retailers say gas tax will hurt business
On Wednesday, the committee heard from a long line of gas retailers, representatives for towns, and trucking and paving lobbyists. Opposition and support for the gas sales tax appeared to be evenly matched.
Led off by lobbyist Joe Choquette, who represents the Vermont Petroleum Association, gas retailers complained at length about a new sales tax, saying it would hurt Vermont gas retailers and push consumers to buy gas in New Hampshire.
“So who are you really hurting? Yes, you’re hurting the retailer, but you know what, you’re also hurting the consumer.”
Choquette produced an analysis showing that under the proposal, gas taxes in Vermont would total 53.7 cents per gallon, compared with New Hampshire’s 38 cents per gallon. If the proposal is enacted, Choquette said Vermont would have the ninth highest gas tax in the nation.
Cole pointed out that New Hampshire is now considering a 12 cent gas tax increase, which, if enacted, would “keep it pretty much at the status quo.”
“All states are looking at a variety of revenues to address these [transportation] infrastructure problems,” said Cole. “New Hampshire is no different.”
Springfield gas retailer Peter Annis pleaded with lawmakers to cut, not raise, gas taxes. “This past January we lost money every day on gas, with the exception of two days,” Annis told lawmakers. “I’m not sure how many of you are aware that retailers are not making anything on gas today.”
“Many Vermonters don’t even know that you’ve already increased the gas tax over the past two and a half years,” Annis said, referring to a 2 percent transportation infrastructure bonding (TIB) assessment on gas imposed in 2010.
“Tell [customers] the state is increasing the gas tax by 10 cents a gallon, based on the current prices? I don’t want to repeat what the customers would say,” he continued. “So who are you really hurting? Yes, you’re hurting the retailer, but you know what, you’re also hurting the consumer.”
Data from the state’s Labor Department showed that the total number of gas stations in the state fell slightly but steadily from 2008 to 2011, from 473 stores to 441 stores. Similarly, total employment at gas stations fell from 3,896 to 3,684. These figures include gas stations with convenience stores, and those without.
Gas retailers also argued that a gas sales tax would be regressive, since it would most hurt those who couldn’t afford fuel-efficient vehicles.
Cole said there are too many unknowns to come to that conclusion. “A variety of factors determine how far you drive, and the type of vehicle you drive,” he said. “And I think it’s a fairly general statement to say that lower-income Vermonters can afford less of a fuel-efficient vehicle. … I don’t know where they work, and how many miles they actually travel.”
Broad-based, or targeted tax?
The proposed sales tax on gas also raises the political question of whether Gov. Peter Shumlin is reneging on his pledge not to increase broad-based taxes. UVM economist Art Woolf told VTDigger that the gas sales tax might technically escape that definition because broad-based taxes like income and sales taxes are levied on all incomes and all products, rather than a specific product, like gasoline.
But, Woolf added: “It’s broad enough that it’ll affect everybody.” He compared it to the 2010 TIB assessment, another tax targeting a broad population, which Woolf considers a “hidden” tax, since it doesn’t show up on receipts.
“This tax, this eight cents, ten cents, or four percent, whatever, is destroying businesses along the New Hampshire-Vermont border, totally destroying them,” said gas seller Cheryl Cote.
Administration Secretary Jeb Spaulding offered a different defense, saying that Shumlin’s oft-repeated pledge not to raise broad-based taxes referred only to taxes relevant to the state’s General Fund — not transportation or education funds.
Asked whether these technical distinctions between state funds mattered to ordinary taxpayers, Spaulding responded: “Look, I don’t think that there’s a citizen anywhere in the world that likes to have more money taken out of their pockets. And we understand that.
“But we think that raising revenues for transportation infrastructure is something more supported than almost anything else I can think of … I think in this case, most Vermonters understand the fact that we need to maintain our infrastructure.”
During committee testimony, trucking lobbyists pleaded with lawmakers not to raise the diesel tax, while paving groups and representatives for towns expressed support for the administration’s plan.
Still, Dawn Francis, a lobbyist with the Lake Champlain Chamber of Commerce, urged the Legislature to “look under every rock first” to find existing funds instead of raising new revenues, even suggesting that $30 million could be taken from school supervisory unions.
“This tax, this eight cents, 10 cents, or four percent, whatever, is destroying businesses along the New Hampshire-Vermont border, totally destroying them,” said gas seller Cheryl Cote at the conclusion of committee testimony. “And I don’t know where you’re going to get the money, but I wish you luck.”
