An ambitious plan to tackle climate change — issued Dec. 1 by the Vermont Climate Council — includes recommendations for a clean heat program, robust weatherization and a significant move toward electric vehicles.
Transportation is Vermont’s largest source of greenhouse gas emissions, and the climate council said electric vehicles are a big part of the solution.
The plan calls for 40% of new vehicle sales to be electric by 2025, with 43,000 electric vehicles on Vermont roads. By 2030, its target is to have 80% of new vehicle sales be electric and 166,000 electric vehicles on the road.
At present, only about 5,000 vehicles in the state are electric, less than 1%.
Pursuit of the council’s ambitious goal presents yet another challenge: how to replace the revenue the state currently raises through its gasoline tax.
Fuel taxes make up a significant portion of Vermont’s transportation revenue — 28%, according to Joe Segale, the policy, planning and research director for the state Agency of Transportation.
Rep. Rebecca White, D-Hartford, who serves on the House Transportation Committee, said she and other legislators have had “many discussions about how to increase the number of electric vehicles on the road while at the same time understanding that the gas tax funds roads and bridges.”
This is not a new problem. Over the past couple of decades, the United States as a whole has shifted toward more fuel-efficient vehicles, which has already had a major impact on revenues from state gasoline taxes. Efforts to meet important goals in mitigating climate change could have most states grappling with this issue for years to come.
“It’s not news that this is an issue,” said Rep. Diane Lanpher, D-Vergennes, chair of the House Transportation Committee. “We need to move away from (the gas tax) as being a source of funding we rely on.”
Vermont currently imposes a tax of 30 cents for every gallon of gasoline that’s sold and 32 cents for diesel fuel. Passenger cars and trucks are the biggest users, but the taxes also apply to tractor-trailers, dump trucks, delivery vans, motorcycles, motorboats, lawnmowers, chain saws — anything that uses gasoline or diesel fuel.
That money goes toward construction and maintenance of roads, bridges and other essential parts of Vermont’s infrastructure. The fuel tax brought in $77.8 million in 2019, according to Michele Boomhower, director of policy, planning and intermodal development at the Vermont Agency of Transportation.
Her department lost an estimated $300,000 of revenue that year because of growing use of fuel-efficient cars, hybrid vehicles and electric cars — a number she describes as insignificant in the transportation budget. Because fuel-efficient vehicles can travel longer distances on less gas, Vermonters have purchased fewer gallons of fuel, which means less tax revenue for the state.
“Gas tax revenues have been soft for quite a while,” Ancel said. “This is not a new problem.”
The state transportation budget does not hinge on the gas tax. The Agency of Transportation budget for the 2020 fiscal year totaled $615.8 million, and other significant sources of revenue included taxes on vehicle purchases and Department of Motor Vehicle activities.
Still, 28% is no small thing. It will be up to the Legislature to figure out how to make up for the lost revenue as Vermont goes electric.
One option is a tax on miles driven, not fuel. A device could be installed in a vehicle to measure the number of miles driven per year, Boomhower said. Because the device would also be equipped with GPS technology, it would be able to subtract any miles driven outside of Vermont, so those would not be taxed. The state wants to make sure this kind of tax applies only to driving on Vermont roads.
Another option is simply a flat fee, something like $125 a year per vehicle, Boomhower said. With the current gas tax, if a car travels 12,000 miles a year and gets 20 miles per gallon, it uses 600 gallons of gas a year. In Vermont, that amounts to a total tax of $180 per year.
A flat fee would be the simplest tax option, but Boomhower said she worries about the financial burden it could pose.
“Right now, you’re paying a few nickels and dimes (in taxes) when you fill up your tank, but this would be a bill of $125, which would be a burden on some Vermonters,” Boomhower said.
Another possibility is to tax the hours spent on recharging electric vehicles — whether at home charging stations or public charging stations.
However, Boomhower said the technology to tax at-home charging is still in the works.
White, the Hartford legislator, said she’s heard the idea of a luxury car tax thrown around, as well as vehicle efficiency fees.
She and her colleagues said they remain unsure what the best plan for Vermont is, but they understand coming up with one will be a major part of their work in the coming years.
“I think we need to be thinking more seriously about this,” said Rep. Janet Ancel, D-Calais, who chairs the House Ways & Means Committee.
“Is this (gas tax) a sustainable source of revenue when we look five, 10, 20 years out? I think the answer is no to that,” White said.
However, the solution is likely to be complicated.
Richard Cowart, an energy and environmental specialist and co-chair of the climate council’s cross-sector mitigation subcommittee, said the issue can be broken down into three primary goals: first, to move Vermont to a cleaner transportation system; second, to equitably support that system; and third, to pay for state infrastructure.
Cowart has not heard a proposal yet that he thinks would be a good fit for Vermont.
It’s more complicated than simply taxing public charging stations instead of the gasoline sold at gas stations. Equity is an issue, he said. For instance, lower-income drivers could be disproportionately taxed at public charging stations because they may not be able to afford charging stations in their homes. Home charging uses just as much electricity per vehicle as public charging, but there’s no easy way to measure it — and tax it.
Equitable taxing also means taxing everyone who uses Vermont infrastructure in a relatively equal way. For example, Cowart said, about a quarter of the revenue from the gas tax currently comes from out-of-staters who use Vermont roads. If the state moved to a year-end tax, in which Vermonters were taxed on miles driven, then out-of-staters would be using Vermont infrastructure without paying for it.
Vermont’s lack of a gas tax substitute isn’t a problem yet, Cowart said. A study by the Vermont Agency of Transportation, issued in 2016, concluded that a tax on electric vehicles is unnecessary until at least 15% of Vermont vehicles are electric.
“It’s really important that the policies we develop to accelerate the uptake of electric vehicles make it easy for working Vermonters to move into those cleaner cars,” Cowart said.
Boomhower figures the state is at least 18 months away from a new tax solution.
“I’m not sure if that will be decided this legislative session or not. It will depend on the response we get from legislators … there are some who are more eager than others,” she said.
More than anything, Cowart wants to see Vermonters get on board with electric vehicles, and he thinks that will need to happen before the Legislature takes any concrete action on taxing them.
“I view this question of ‘what we do next if we’re successful’ as perhaps a wonderful challenge to have,” Cowart said.
Correction: The original version of this story failed to note efforts by electric companies such as Green Mountain Power to distinguish between general electrical use and use of electricity for vehicle charging.