Joint Fiscal Office: Purchase-and-use tax growing, shifting share of transportation revenue

Logan Bilberry, an analyst with the Joint Fiscal Office, told the Senate Transportation Committee on March 18 that Vermont’s purchase-and-use tax is the fastest-growing source of revenue for the Transportation Fund and is projected to increase faster than inflation through 2030.

Bilberry said 32 VSA §8903 sets the purchase-and-use rules and that the tax imposes a 6% rate on the value of motor vehicle purchases and a 9% tax on short-term rental vehicle charges. "32 VSA 8903 is the statute that lays out the purchase and use tax," Bilberry said.

The committee heard that current law directs two-thirds of purchase-and-use revenue to the Transportation Fund and one-third to the Education Fund. Bilberry presented forecasts showing that purchase-and-use represented about 25% of Transportation Fund revenues in 2015 and is projected to reach about 35% by 2030, while gasoline tax share falls from about 29% to about 20% over the same period.

Bilberry said purchase-and-use receipts are projected to grow roughly 3.22% annually in the forecast, while total Transportation Fund revenues grow about 1.22% between now and 2030. He also displayed a historical timeline of statutory changes: the tax was created in 1960 at 2%, increased and modified several times, and was raised to 6% with Act 60 (1997), followed by the 2004 swap that moved portions of gas and purchase-and-use allocations between funds.

Committee members asked whether the purchase-and-use gains are driven by more frequent purchases or higher vehicle prices; Bilberry said the post-pandemic bump and higher vehicle prices both contributed to the revenue increase. He also presented a hypothetical comparing current allocations to a pre-2004 allocation and said the cumulative gap in Education Fund receipts since the swap totals roughly $38.3 million—about $6.3 million per year on average.

Members pressed for additional breakdowns: how much of gasoline and diesel tax revenue comes from passenger versus commercial vehicles; whether rental-car receipts (taxed at 9% on the rental charge) are a material share; and whether school-of-thought choices in earlier decades explain current allocations. Bilberry responded that some of those breakdowns would require further analysis and referred questions about freight and road wear to technical studies already done elsewhere.

The presentation closed with a committee request that the Joint Fiscal Office and agencies return with more disaggregated data on vehicle classes (passenger vs. commercial), rental-car revenue trends, and a clearer explanation of how past statutory swaps altered Education Fund receipts.

Looking ahead, Bilberry and several committee members noted that because purchase-and-use is a growing revenue source while gasoline tax receipts decline, any future policy choices about indexing or reallocating revenues will materially affect both Transportation and Education fund balances.

The presentation cited statute and historical acts by name and left policy choices for future committee consideration.