JFO briefs House Ways & Means on motor vehicle purchase-and-use tax; Gov. plan would shift $10M a year to transportation fund

Logan Moberry of the Joint Fiscal Office told the House Ways and Means committee on Feb. 4, 2026, that Vermont's motor vehicle purchase-and-use tax is a 6% levy collected by the DMV at purchase or registration and that certain heavy trucks and trailers are subject to statutory caps (Moberry cited a cap of $2,486 for trucks over 10,099 pounds). He said most passenger vehicles are taxed at 6% of value and short-term rentals carry a separate 9% rental charge.

Moberry outlined the tax's history and current allocation rules, noting that since a revenue swap in the mid-2000s the transportation fund receives roughly two-thirds of P&U receipts and the education fund receives one-third. "Under current law, the transportation fund receives two thirds. Education fund receives one third," Moberry said during his presentation.

The Joint Fiscal Office presented forecasts showing purchase-and-use revenues account for roughly 32% of transportation fund revenues today and could grow without policy change. Under the governor's recommended budget, Moberry said the executive proposes phasing down education fund allocations by $10 million a year and reallocating that amount to the transportation fund; the presentation showed the P&U allocation to the education fund reaching $0 and the transportation fund receiving the full forecasted P&U by 2031 if the proposal is fully phased in.

Moberry warned of downstream effects. "Shifting P and U out of the [education] fund will put upward pressure on property taxes," he said, and the recommendation includes a $10 million general-fund transfer to the education fund in the first year to soften that impact but that offset is "unclear" in future years.

Committee members asked clarifying questions about the taxable base. When asked whether trade-in allowances and subsidies reduce taxable value, Moberry said trade-in allowances are deducted from the purchase price before tax and that treatment of subsidies or federal EV tax credits depends on the transaction structure. "At a high level, the purchase-and-use applies to what you're paying for the transaction," Moberry said, warning that DMV can rely on book value when paperwork suggests a nominal sale.

Members also raised policy options for future consideration. Representative Maslow suggested exploring whether the P&U tax could be collected more progressively (for example, increasing collection on very high-value vehicles). Representative Page asked whether a mileage-based user fee has been studied; Moberry confirmed that mileage-based user fees have been discussed and that the transportation committee has examined the concept.

Moberry described how transportation dollars can leverage federal funds but are not an unlimited match: he estimated roughly 1 T‑fund dollar can leverage about 4 federal dollars depending on eligibility and program restrictions, and he cautioned that large maintenance expenditures are not typically federally eligible.

Next steps: committee members requested additional testimony and data on revenue impacts, EV subsidy treatment, and rental-tax breakdowns; the committee planned to continue the discussion and to review further JFO analysis in upcoming meetings.