Increase In Gas Tax Could Lead To More Federal Transportation Money

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Governor Peter Shumlin says he wants to be able to draw down all the federal transportation funds that are available to the state. That means it’s likely that the governor will propose a plan to raise new gas tax revenues in his budget speech on Thursday.

The state faces a Transportation Fund shortfall for several reasons. Federal stimulus money is no longer available and the cost of construction projects has grown significantly in the past 10 years.

A third factor is that many cars are more fuel efficient and that’s a problem because Vermont’s gas tax is based on the number of gallons sold.

Most federal transportation money is available to the state on an 80/20 match basis – so Vermont gets $80 million for every $20 million it raises.

If the state wants to receive all of the federal money that’s available this year, it will need to raise another $20 to $30 million in new gas revenue. It’s likely this will happen because the Governor says he definitely wants those federal funds.

"If we stick with the revenue that we’re currently getting from the gas tax we would send about $20 million back to the federal government that we need to maintain our crumbling roads and bridges," Governor Shumlin said. "So we’re going to be working together to try to come up with some reasonable solution so that we’re not sending federal dollars back."

House Speaker Shap Smith agrees that something needs to be done to increase the state’s gas tax revenue base.

"If something doesn’t get done we are not going to be able to make the investments in transportation that we need to to maintain our system and that’s fundamental to a thriving economy and we need to fix those roads that are really in band shape and are not roads that you really want tourists or anybody to be driving on," Smith said. 

House Transportation chair Pat Brennan says there are several options to raise more money from the gas tax. The state’s 20 cent per gallon tax could be increased or the sales tax could be applied to the sale of gas so that when the price of gas goes up so does the tax.

He says some states have turned to a third option- indexing the state gas tax to inflation. That’s an approach that would see the gas tax automatically go up roughly 2 or 3 percent a year and allow the state to tackle its backlog of transportation projects:    

"We had the ability to put in an inflator that would index gas and have it grow with the CPI we didn’t do that if we had this discussion may not be taking place. That might be a discussion for this session,"Brennan said.

Brennan says some states are beginning to explore a tax based on the number of miles a person drives, but he says there are still too many questions about this approach for it to be an option this year.

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