In Brief:
Vermont is a good place to own an electric vehicle. It offers financial incentives to EV buyers that are among the most generous of any state's. Vermont also has a higher rate of charging stations per capita than nearly any other place in the nation.
From now on, it will also charge EV drivers an annual fee. Backers of the policy say it’s not a punitive measure but a means of investing in additional charging infrastructure, as well as a step toward ensuring that all road users share in the cost of maintenance and repair.
In a transportation bill that Vermont GOP Gov. Phil Scott signed this month, the state created an $89 annual fee on registered EVs. The revenue from the fee will help finance new charging stations at workplaces and multifamily apartment buildings.
Lots of states and cities, along with the federal government, are working to accelerate the transition to electric vehicles in the U.S. They’re also looking for alternate ways of paying for road maintenance as state and federal gas tax revenues shrink. National Republicans, including former President Donald Trump, are working to make President Biden’s EV policies a campaign issue, framing new fuel-efficiency rules as an EV mandate.
With the new fee, Vermont joins a handful of other states that both charge fees and offer incentives to EV owners. It’s not a long-term solution to the looming problem of dwindling gas tax revenue, but it weakens the argument of EV opponents, who have often claimed that EV drivers get a free ride on publicly funded roads. “It definitely will help change the discussion,” says state Sen. Andrew Perchlik, the Democratic chair of the Vermont Senate Transportation Committee.
Incentives and Disincentives
Under the Inflation Reduction Act, the Biden administration’s signature climate effort, the federal government now offers a $7,500 tax credit for EV buyers who meet certain income requirements. At least 19 states offer additional incentives of their own, according to the Tax Foundation. About half of the states impose fees on EVs. A handful of states — now including Vermont — have both incentives and fees.
States with progressive environmental policies, including Vermont, have tended to be ahead of the curve on EV adoption. Under state law, utility companies in Vermont have offered energy-efficiency incentives, including rebates for EV purchases, for close to a decade. California has by far the most registered EVs. Zero-emission vehicles accounted for more than a quarter of all sales there last year.
The political discussion around adopting an EV fee in Vermont was a bit unusual. The Legislature had been considering EV fees for years, Perchlik says. On one side, critics argued that EV owners don’t pay their fair share of road maintenance because they didn’t pay the gas tax. Many EV owners in the state agreed with that argument themselves and would periodically ask the Legislature to adopt a fee, he says. “We were sympathetic to the argument that the EV owners did need to pay money to help provide infrastructure support,” Perchlik says.
Mixed Politics
The proposal this year had support from Republican and Democratic legislators. A handful of Progressive Party legislators opposed it, urging the state to stick to a deal with environmental advocates to hold off on adopting a fee until EVs made up 15 percent of Vermont auto sales.
Ultimately, the Legislature agreed to an $89 annual fee, but instead of using the revenue to help pay for road projects, as with the gas tax, the money will be spent on non-public EV chargers that are hard to fund with existing federal and state programs. Perchlik says that was part of a compromise with representatives in the state House who worried about creating a disincentive for EV ownership that might counteract state climate goals.
But the EV share of the Vermont vehicle market is getting close to 15 percent and growing steadily, says Ben Edgerly Walsh, climate director for the Vermont Public Interest Research Group. The new fee won’t change the trajectory substantially. “We don’t really have a concern that this is going to throw a wet blanket on the EV market at this point,” he says.
Gov. Scott has generally been a strong proponent of EVs and a strong opponent of fees and taxes. He vetoed last year’s budget over tax hikes passed by the Legislature. But he signed this year’s deal even with the new fee on EVs.
In Vermont, while some conservatives are still skeptical about pro-EV policies, low-income rural families sometimes spend as much as a third of their income on transportation costs. “There’s beginning to be more of a recognition that in rural parts of this country, which is to say most of Vermont, there is an enormous financial benefit to helping people get into electric vehicles,” Edgerly Walsh says.
Waiting for Gas Tax Replacement
A big issue for Vermont and other states at the forefront of the EV transition is how to pay for road maintenance while gas tax revenue is shrinking because of the adoption of fuel-efficient and electric vehicles. It’s a conundrum in climate policy, where states are reliant on revenue from a type of activity they’re theoretically trying to discourage.
Vermont state Sen. Richard McCormack, a Democrat and longtime environmental advocate, considers the gas tax to be a type of sin tax. “The trouble with any sin tax is that the state gets addicted to the sin,” he says.
Vermont, like many other states, is working on policies that would charge road users for vehicle miles traveled (VMT) — something that could eventually replace the gas tax. Lots of details need to be worked out, including whether to charge a flat fee per year, to base mileage on odometer readings or to track mileage using GPS devices.
There are also questions about how to handle out-of-state mileage accrued by Vermont drivers and how to collect revenue from out-of-state drivers visiting or passing through. Just three states have enacted VMT fee programs, while pilot programs are underway in over a dozen more. The federal government is working on a pilot program as well.
The Vermont Department of Transportation estimates a VMT policy couldn’t be in place until 2026 at the earliest. The state’s new EV fee would expire whenever a VMT policy is enacted.
McCormack, who is retiring this year after 30 years in the Legislature, didn’t want to support the new annual fee on Vermont EVs. Even if it’s a small fee, it’s a disincentive to do something the state should be promoting, he says. Given the increasingly dire impacts of climate change, the state should be full speed ahead on its energy transition, he says.
But legislating requires collaboration, “and collaborating is different from doing exactly what you want to do,” McCormack says.
