From Flat Fee to Per-Mile Charge: Vermont's Plan to Keep Roads Funded as EVs Grow

Starting January 1, 2027, Vermont will charge electric vehicle owners based on miles driven between annual inspections. Here's how it works, what it costs, and why rural drivers may actually benefit.

Why Vermont Needs a New Road Funding System

For more than a century, states have funded road maintenance through gasoline taxes—a simple system where drivers who used more fuel generally drove more miles and paid more tax. That connection is breaking down as electric vehicles become more common and fuel-efficient cars use less gas.

Vermont faces a particularly acute challenge. The state’s climate commitments, including the Global Warming Solutions Act, effectively require phasing out gasoline-powered vehicles—the very source of transportation funding. As electric vehicle market share approaches 15% of new registrations, state officials warn the revenue gap is shifting from a minor concern to a structural crisis.

Both Vermont and Hawaii are receiving federal grants to pilot solutions. Vermont has secured approximately $3.75 million in federal funding to design its mileage-based user fee (MBUF) system, while Hawaii received $5.76 million for similar work.

Vermont’s Timeline and Approach

Vermont has been building toward this change through several legislative steps:

2023: Act 62 authorized applying for federal grants and studying MBUF options.

2025: Act 148 created an interim fix—a flat annual fee of $89 for battery electric vehicles and $44.50 for plug-in hybrids, effective January 1, 2025.

2027: Act 43 mandates the full mileage-based system begins January 1, 2027, for battery electric vehicles. The $89 flat fee ends, replaced by a per-mile charge.

How Much Vermont Drivers Will Pay

Vermont’s legislation doesn’t set a specific per-mile rate in statute. Instead, it directs that the fee should roughly equal what the state collects from gas tax on comparable gasoline vehicles.

Based on analysis by the University of Vermont Transportation Research Center, the revenue-neutral rate would be approximately 1.5 cents per mile. For a driver covering 12,000 miles annually—close to the national average—that equals $180 per year.

This compares to the current $89 flat fee and represents Vermont’s priority on achieving immediate revenue replacement rather than gradual adoption.

Plug-In Hybrids Get Different Treatment

Vermont’s system will not charge plug-in hybrid vehicles (PHEVs) by the mile. They’ll continue paying the $44.50 flat annual fee.

The reason is technical complexity. PHEVs use both gasoline and electricity, so they already pay gas tax on their fuel consumption. Charging them for total miles would mean double taxation on miles driven using gasoline. Separating “electric miles” from “gas miles” would require expensive tracking technology Vermont wants to avoid.

Hawaii’s Different Model: A Gradual Approach

Hawaii provides an interesting contrast. Under Act 222, Hawaii’s road usage charge begins July 1, 2025, with a fundamentally different philosophy.

Hawaii charges just 0.8 cents per mile—about half Vermont’s projected rate. More significantly, Hawaii caps the annual charge at $50, which also happens to be the alternative flat fee option.

Here’s the strategic design: Most Hawaii drivers travel between 8,700 and 9,700 miles annually, according to state transportation data. At 0.8 cents per mile, that would cost between $70 and $78 without the cap. But the cap limits everyone to $50—the same as the flat fee.

This means high-mileage drivers pay no penalty for choosing the per-mile option. Hawaii officials explain this is intentional: the goal is getting drivers comfortable with mileage reporting before increasing costs. Starting July 1, 2028, the flat fee option disappears and the cap increases, eventually expanding to all vehicles by 2033.

The Rural Equity Question

Conventional wisdom suggests mileage fees hurt rural residents who drive longer distances. But detailed analysis reveals a more complex picture—what researchers call the “Rural Equity Paradox.”

The University of Vermont study, analyzing over 300,000 registered vehicles, found that rural households would see minimal impact or even savings under MBUF compared to the current gas tax system. Urban and higher-income households would see the greatest cost increases.

The explanation lies in vehicle efficiency. The gas tax isn’t really a tax on miles—it’s a tax on fuel consumption. A rural driver with an older pickup getting 15 miles per gallon effectively pays about 2 cents per mile in state gas tax (at roughly 30 cents per gallon). If that driver switches to an electric truck and pays 1.5 cents per mile under MBUF, they receive a 25% per-mile tax cut.

Conversely, an urban driver in a hybrid getting 50 MPG pays only 0.6 cents per mile in gas tax. Switching to an electric vehicle at 1.5 cents per mile represents a 150% increase.

The study also found that flat fees are more regressive than mileage fees, penalizing low-mileage drivers—often elderly residents or those with short commutes—by charging them the same amount as high-mileage drivers.

Privacy and Tracking Concerns

Early mileage fee pilots in other states used GPS devices, triggering “Big Brother” concerns. Vermont and Hawaii have taken a different path.

Both states rely on simple odometer readings during annual safety inspections. In Vermont, mechanics already record this number as part of the inspection process. That data goes to the Department of Motor Vehicles, which calculates the annual fee.

This approach captures how many miles were driven, but not where, when, or how fast. There are no GPS devices, no tracking, and no location data collection. The system leverages existing inspection infrastructure rather than creating new bureaucracy.

For vehicles sold mid-year or moved out of state, Vermont’s legislation requires capturing the odometer reading at the point of sale to calculate a prorated fee.

Common Misconceptions

Several arguments appear frequently in public discussion:

“This is double taxation”: Electric vehicle owners pay for electricity but not road taxes. The MBUF isn’t a second tax—it’s the road infrastructure fee that was previously bundled into gasoline prices but doesn’t exist for electricity. Vermont currently has no plans to tax public charging stations, though Act 43 directs studying this option to capture revenue from out-of-state drivers.

“This penalizes doing the right thing”: Some environmental advocates argue charging EV owners discourages adoption. State officials counter that without stable funding, the infrastructure needed for long-term climate goals—including public transit and road maintenance—will deteriorate.

“EVs are getting charged for the first time”: This overlooks that Vermont’s $89 flat fee began January 1, 2025. The 2027 transition changes from a flat fee to a variable fee, not from zero to a fee.

What Happens Next

Between now and January 2027, Vermont’s Agency of Transportation will finalize the specific mileage rate, develop the billing system, and integrate it with existing DMV and inspection station operations.

The exact per-mile rate will be set through administrative rulemaking, guided by Act 43’s directive to match gas tax revenue. The University of Vermont’s 1.5 cents per mile estimate provides a baseline, but the final rate will depend on updated vehicle registration data and revenue projections.

Battery electric vehicle owners will receive their first mileage-based bills in early 2027, based on odometer readings from their annual safety inspections. The system is designed to be largely invisible to drivers, requiring no new apps, devices, or separate payment processes beyond what already exists for vehicle registration.

Vermont transportation officials will monitor the implementation closely, particularly watching Hawaii’s earlier rollout for lessons learned. Both states’ experiences will inform potential federal action on mileage-based funding and serve as models for other states facing the same transition as gasoline tax revenue continues to decline.