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Politically Thinking: State must find way to fund road repairs

Funding the state’s transportation program is a major issue on the agenda of this year’s legislative session. Since 2000, miles traveled on Vermont’s roads have increased by 13 percent, but annual gasoline and diesel fuel tax revenues are the same today as they were 12 years ago. As Vermonters have replaced gas-guzzlers with more fuel efficient vehicles, the new vehicles use less fuel per mile. Thus, gas and diesel taxes, which are the principal sources of revenue for the state’s Transportation Fund, are not keeping up with the wear and tear on the roads.
Over the past 10 years, the backlog of road and bridge repair projects in Vermont has grown. Vermont’s roads, once among the best in New England, are now rated as below-standard by many national transportation organizations. Infusions of federal funds from the 2009-10 stimulus program, and emergency funds from Washington following Tropical Storm Irene, have helped the state repair more miles of road, and more bridges, in the past three years than in much of the previous decade.
However, these federal funds are drying up. Also, the dysfunctional Congress has not been able to pass a multi-year highway and transportation bill that would allow the states to anticipate a predictable level of federal spending on roads, rail, and public transport. Thus, Vermont is left to rely primarily on declining gas tax revenues to fund its transportation program.
Vermont is not alone in this situation. State governments all over the country are considering how best to fund their transportation programs. Four alternatives are being considered nationally, some of which would be applicable to Vermont, others not.
The first inapplicable option would be tolls, which can work in states such as Massachusetts where much travel is on interstate highways with a limited number of interchanges, but not in a rural state like Vermont. Another unrealistic option would be a miles traveled tax, which requires installation of a GPS device in every vehicle to keep track of how many miles it has been driven. This option is expensive to implement and raises serious privacy concerns.
The first realistic option for Vermont is raising existing gasoline and diesel fuel taxes. While the easiest option, this approach has unintended consequences. By raising the price of gasoline, it will encourage more motorists to purchase new fuel-efficient vehicles, thus exacerbating the problem of declining gas tax revenues over time. Gasoline taxes are also regressive, since lower-income households spend a higher proportion of their incomes on gasoline than higher-income households. Additionally, convenience store owners in border towns will oppose higher gas taxes, since Vermont’s gas tax is already higher than in both New Hampshire and Massachusetts.
The second realistic alternative is raising additional transportation revenue from vehicle registration fees. Many states now charge fees that are calculated as a proportion of the vehicle’s value, as opposed to Vermont’s flat charge of $70 for a one-year registration. For example, in California all cars are charged a base fee of $66 per year, with a additional proportional fee of approximately $6.60 per $1,000 of value. The annual fee for a new car worth $30,000 would be $262, while that for an older car worth $10,000 would be $132.
Moving to proportional registration fees would be a better option for Vermont than raising the gas tax. Proportional fees do not have the unintended consequences of higher gas taxes. Also, since higher-income households are more likely to purchase higher-value cars, proportional fees spread the burden of paying for the state’s transportation program more equitably across households than higher gas taxes.
Eric L. Davis is professor emeritus of political science at Middlebury College.

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