New England states move ahead with fuel tax increase plans

By Keith Goble, Land Line state legislative editor | Wednesday, March 20, 2013

Officials in two New England states are considering their options to raise revenue to benefit road and bridge work.

Citing fewer tax dollars available from the state’s fuel tax, Vermont lawmakers are looking at multiple methods to generate about $600 million for transportation work.

The Vermont House Ways and Means Committee voted 10-1 to advance a bill to apply a 2 percent sales tax on fuel. The change would add nearly 7 cents to the per-gallon tax rate.

In July 2014, the sales tax would double to 4 percent. The following year, the tax rate would be tied to the consumer price index, which would allow for regular increases. At the same time, the state’s 19-cent-per-gallon excise tax rate would drop by 5.9 cents to 13.1 cents.

The tax changes sought in H510 would result in a net tax increase of about 7.6 cents per gallon. Additional revenue for the state would amount to about $26 million by 2015.

Advocates say the changes are needed because people don’t drive as much as they used to and when they do drive they travel in more fuel-efficient vehicles. They say that tying the tax rate to the pump price would allow state revenues to grow with inflation.

The full House is expected to vote on the bill as soon as this week.

Across the state line in New Hampshire, a bill under review in the state’s House would nearly double fuel taxes to pay for road and bridge work. One project that would benefit is widening work on Interstate 93.

The state’s 18-cent-per-gallon tax has not increased since 1991.

The House Ways and Means Committee voted 11-7 along party lines to trim the proposed increase in gas and diesel tax rates by three cents to 12 cents. As introduced, the bill sought to impose a 15-cent-per-gallon increase.

The revised version would increase the state’s gas tax rate to 30 cents over three years. The diesel tax rate would be increased over six years.

Proponents say that something needs to be done to address a funding shortfall that state transportation officials put at $1.3 billion during the next decade.

Before the vote Rep. Dave Campbell, D-Nashua, assured the committee that a smaller tax increase than initially proposed would still benefit the state.

“Taking three cents off would still make this bill work. It would still help our roads and bridges. It would still accomplish what we need to accomplish,” Campbell testified.

The 10-year, $817 million bill would protect the new money from being used for anything other than state and local roads and bridges. The state would continue to route a portion of the existing tax to other state agencies.

HB617 next moves to the House floor for a final chamber vote. If approved, it would then head to the Senate.

The fuel tax increase is far from a sure bet to win legislative approval. State Republicans have voiced concern about increasing taxes in a tough economy.

Rep. Patrick Abrami, R-Stratham, acknowledged that a fuel tax increase may be necessary. However, he objected to a 12-cent boost.

To view other legislative activities of interest for New Hampshire, click here. To view other legislative activities of interest for Vermont, click here.

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