Vermont policymakers have known for years that as more people opt to buy electric vehicles, the money the state brings in from its gas tax will drop significantly.
That has led to a conundrum: Officials want to replace that cash, which pays for vital infrastructure projects and makes up more than a quarter of state transportation revenue, while encouraging Vermonters to switch to the electricity This year’s omnibus transportation bill, H.479, tasks officials with hammering out a solution.
The legislation, which passed the Vermont House last month and is now in the Senate, would direct the Transportation Agency to design a system by July 1, 2025, to charge electric vehicle drivers a fee in depending on how many miles they drive.
Officials have outlined one possible framework: The Department of Motor Vehicles could calculate the amount drivers owe using odometer readings, which are already collected during annual vehicle inspections.
The fees would be comparable to what the average gas car driver pays in state gas taxes, which is about $150 a year, said Patrick Murphy, director of sustainability and innovation projects at the Transportation Agency . Drivers are likely to be able to pay in several installments over the course of a year.
A 2022 study commissioned by the agency determined that a mileage-based user fee was the best option to replace gas tax revenue in the state.
In that sense, “it’s not really a new toll. It’s just a different type of road user charge,” Murphy said. “And it adapts to changes in vehicle technology.”
Some environmental groups, however, have rejected this proposal. Robb Kidd, conservation program manager for the Vermont Sierra Club, wrote to lawmakers last month saying his organization opposes any new fees for electric vehicle owners, which he argued would discourage people from buying electric vehicles and would hinder the state’s progress towards its legally mandated climate action. goals
H.479 also recommends charging hybrid vehicle owners a higher registration fee, but not a mileage-based user fee, to make up for the gasoline taxes that such drivers do not pay. Murphy noted that the state cannot determine how many miles a hybrid car gets on gas versus its battery.
The bill does not propose to change gas car rates.
This year, the state estimates $1 million in lost revenue because fewer people drive gas-guzzling cars. As of January, the state had registered approximately 4,800 all-electric vehicles and 4,100 plug-in hybrids, according to the Transportation Agency. (Plug-in hybrids, such as a Toyota Prius Prime, rely primarily on a battery, while traditional hybrids only use a battery to supplement an internal combustion engine.)
Lawmakers have been eyeing July 2025 to launch a mileage-based user fee program because that’s when the state aims for 15 percent of all new vehicles to be fully electric or plug-in hybrids.
About 8 percent of new cars registered in the state last year fell into those two categories, Murphy said, though it’s an open question whether the state will meet its goal. Matt Cota, managing director of the Vermont Automotive and Vehicle Dealers Association, called it a “pretty steep increase.”
The organization, which represents auto dealers, does not have a position on the mileage-based fee, Cota said.
This year’s transportation bill proposes to expand the number of households eligible for incentives to purchase electric vehicles, which Murphy believes will help increase the adoption rate. He said the state is confident 15 percent by mid-2025 is a realistic goal.
Murphy acknowledged, however, that the mileage-based user fee is “not a perfect system.” Drivers who regularly travel out of state may think it’s unfair to pay Vermont for the miles they drive on other states’ roads, he said. Similarly, the mileage-based fee would not cover EV drivers from other states who drive in Vermont but could have fueled up at a gas station here, if they had driven a gas-powered car.
According to Murphy, the state estimates that about 20 percent of its annual gas tax revenue, which is projected to be about $78 million this fiscal year, comes from out-of-state drivers.
Lawmakers have also considered creating another tax on power dispensed through electric vehicle chargers, and H.479 says the state would have to “work on it.”
This refers to Kidd of the Sierra Club. That fee may be the best way to bring in revenue from out of state, he said, but he was concerned about the impact on Vermonters who have lower incomes and are less likely to have access to a charger at home.
If the state also charged a fee based on mileage, he suggested, those people could end up paying twice as much.
The 2022 study concluded that officials did not know enough about implementing a fee on electric vehicle chargers to recommend one at a time.
Kidd says the state should examine the sources of its transportation funding more broadly and away from fossil fuel-based sources such as a gas tax.
Nationally, several states have enacted mileage-based user fees on electric vehicles, according to the Vermont Agency of Transportation. About 30 charge an annual fee when electric vehicles are registered, similar to what H.479 proposes for hybrids only.
Wayne Weikel, a lobbyist with the Alliance for Automotive Innovation, which represents car and truck manufacturers nationwide, told members of the Senate Transportation Committee on Thursday that his organization supports this model of “flat rate”.
He noted that other states have considered requiring an additional tracking device to be placed in people’s cars to more accurately record miles driven, but “people really hate that idea” and raise questions about personal privacy.
In Montpelier, some senators have raised their own concerns with the “flat rate” model, arguing that it amounts to a regressive tax.
“Should an electric car that does 5,000 miles next year pay the same rate as a car that does 25,000 miles?” Sen. Thomas Chittenden, D-Chittenden Southeast, said Thursday. “That’s why I’m inclined to support the trajectory toward vehicle miles traveled.”
The committee is scheduled to continue taking testimony on H.479 next week.
