MONTPELIER — 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 Vermont 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. 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 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.
The state transportation budget does not hinge on the gas tax. The AOT 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.
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. The problem is not keeping track of electricity use in private homes. It’s that it is nearly impossible for electric companies to tell the difference between electricity being used to charge an electric car versus other day-to-day electricity needs, such as charging cellphones or watching TV.
“We’d need super smart meters to be able to track that, and the technology is just not there yet,” Boomhower said.
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.