House Transportation committee hears options to shore up road funding: gas tax tweaks, mileage fees, retail delivery charge

Members of the Vermont House Transportation Committee heard an informational briefing on Thursday from the Joint Fiscal Office about three possible revenue options to support the state transportation fund: adjustments to the existing motor fuel tax, a mileage-based user fee, and a retail delivery fee.

Logan Murray of the Joint Fiscal Office briefed the committee and described the presentation as “informational” and not a recommendation: “This is just informational. There is no sort of policy recommendation or any direction that I think the committee should go,” Murray said. The session provided staff-level estimates, historical context and potential implementation issues for each option.

The committee received detailed explanations of how Vermont’s current motor fuel tax and assessments are structured. Murray described a hybrid system made up of a fixed per‑gallon component and variable assessments tied to the prior quarter’s average retail price. He said the statutory minimum assessment for one variable portion is currently 13.4¢ per gallon and that federal and state levies together amount to roughly 50¢ per gallon in recent quarters. Murray told the committee that, on average, an ordinary driver (about 11,000 miles per year in a roughly 24 mpg vehicle) pays roughly $157 annually in state and federal motor fuel taxes, and that each one‑cent increase in the fixed state per‑gallon tax would bring in roughly $2,840,000 in a full fiscal year, assuming steady consumption.

Murray also noted structural limits of the current formula. Because the assessment uses minimum and maximum floors, simply raising the assessment percentage (for example from 4% to 5%) would not produce additional revenue at current price levels unless the percentage increased enough to exceed the statutory floor. He warned that any change to the fuel tax would not reverse the long‑term decline in revenue driven by improved vehicle fuel efficiency and greater adoption of electric vehicles.

The second option discussed was a mileage‑based user fee (MBUF or road usage charge). Murray said several states are testing or operating versions of this approach—he listed Oregon, Utah, Virginia and Hawaii—and that proposals commonly focus first on electric vehicles because EVs currently pay little or no motor fuel tax. He emphasized the implementation trade‑offs: startup costs, data collection and administration, privacy and rulemaking questions, and the policy choices about whether to apply the fee only to EVs or to all vehicles. Committee members asked about interstate coordination and the share of fuel tax revenue paid by out‑of‑state drivers; a legislator noted that out‑of‑staters can account for a sizable share of motor fuel revenue.

The third option was a retail delivery fee, a per‑order fee on deliveries of tangible goods collected by the retailer and remitted to the state. Murray said Colorado and Minnesota have implemented such fees (Colorado’s fee at about $0.29 per order and Minnesota’s at $0.50 under their differing thresholds and exemptions) and that the Joint Fiscal Office funding study modeled a 30¢ fee with no exemptions, yielding an estimated $10.9 million annually. He told the committee the design details—thresholds, exemptions for medical goods, de minimis small‑seller carve‑outs, and administrative responsibilities for the Department of Taxes—would strongly affect revenue and legal exposure.

Committee members raised a range of implementation and policy concerns: competitiveness with neighboring jurisdictions, equity and regressivity of consumption‑based fees, the administrative burden for small businesses and the Department of Taxes, privacy and technical questions for mileage reporting, and whether the state should pursue a blended package of revenue sources rather than a single solution. Several members observed the political sensitivity of gas‑price measures even where the fiscal contribution per driver is modest.

No motions or votes were taken; committee members asked staff to provide additional information and said they expected further presentations from the administering agencies. The committee adjourned to resume later.