Skip to comments.Driving Toward a New Highway Federalism
Posted on 10/15/2017 7:16:52 PM PDT by Tolerance Sucks Rocks
The Trump administration is developing principles that will guide future highway funding. At a recent White House meeting with state transportation officials, the administration announced it was considering shifting greater funding responsibilities to the states. Along with expanding the private sectors role and loosening tolling restrictions, these reforms will result in better decisions and management of the transportation system. It makes sense for Congress to support these transportation policy reforms.
Ted Mann of the Wall Street Journal recently reported that the administration is thinking about reducing the share of federal dollars that fund highway construction. Rather than receiving the usual 80 percent to 90 percent share of federal funding for highway construction, states would receive about 20 percent of project costs. The idea is for state and local governments to fund the bulk of a project, with the federal government kicking in the final funds needed to close the deal. If the administration follows through on this reform, we can expect state and local officials to make better choices as to which projects to fund. Heres why:
Most highways and roads predominantly serve local residents. Elected officials should prioritize those highway or road projects where the value or benefits to the community (e.g., faster and safer trips) outweigh the costs of building and maintenance. Because local officials have better information about local transportation needs than officials in Washington, these decisions are best made at the local or state level. For most highway and road decisions, there is no economic argument for federal involvement.
Critics will claim that many towns or even states will find voters unwilling to support efforts to raise funds through taxes or borrowing to finance local highway projects. But thats the whole point of shifting more funding responsibilities to states and cities. When a community is not willing to pay for a new road with higher taxes or borrowing, its telling officials that the project is not worth moving forward. That is, the benefits are less than the anticipated costs. Since the road doesnt pass a simple benefit-cost test, it should not be built.
Currently, federal dollars and political lobbying by construction unions distort these choices. Suppose a highway project would cost a community more dollars to build and maintain than the benefits it provides. The project should not be built. When the federal government kicks in 80 percent or 90 percent of the funds, a highway may be built even when there are better alternative uses of the funds.
There are cases where there is an economic argument for federal or state funding, but they are far more limited than in the current system. If drivers using the highway live outside the community or state, we cannot expect local politicians to factor in these spillover benefits. Non-voting, non-taxpaying drivers are unlikely to influence project funding decisions. This can result in a decision not to build a highway because the officials estimate of the benefits is less than the cost even when, in fact, the true total benefits exceed the cost. Here, the federal government, or in some cases state governments, can step in and provide funds to tip the scale in favor of the project.
How common and how big are these spillover benefits? Its difficult to tell. But its highly unlikely that they are worth the current federal subsidy of 80 percent to 90 percent of a projects cost. That would require the vast majority of drivers on most roads and highways to be from other communities. Survey data from the U.S. Department of Transportation indicate about one-third of drivers on interstate highways are from out of state. Also, the average drive is only about 10 miles. This suggests the current federal contribution is far too high. The administrations idea to lower the federal governments funding share in highway financing makes economic sense.
Its good to hear that the administration is considering sound principles to reform how we fund highways. Shifting greater funding responsibilities to state and local governments would improve transportation decision making. It would make sense for Congress to embrace this reform.
Robert Krol is a professor of economics at California State University, Northridge, and the author of forthcoming research on Political Incentives and Transportation Funding to be published by the Mercatus Center at George Mason University. Readers may send him email at email@example.com.
Remove the federal gas tax and be done with it.
None of that money seems to be going toward highways anyway.
If we’re going to have to pay tolls ever 50 miles down the road, we shouldn’t be required to pay so much for gasoline.
Driverless cars will take over before tolling of highways becomes widespread...at that point, highway financing will be through fees tacked on to the rides.
The other states should do like Kansas does, charge out the ass to register a car. Actually I wish they would, then Kansas residents would no longer tag in other states to evade the Kansas pp tax.
Maryland charges out the ass, too. $135 for a two-year regristration on a passenger car.
$101 for 1 year in Illinois.
$250 for a One Year Registration in CA, 2015 Model Year Car.
This is where the author's point doesn't stand up under scrutiny. This undermines the whole purpose of having a national highway system in the first place. What incentive does a state like California or New Jersey have to build and maintain the last stretch of roadway connecting it to a neighboring state if they're paying for 80% of the cost while 100% of the users are interstate travelers?
You are correct. Little to none of the 18 wheeler traffic is local.
The new local roads are adjunct to the interstate system. The roads are necessary to carry the traffic around cities that developed from growth.
Because most of those interstate travelers provide some benefit to the state itself, whether it's stopping for gas, buying lunch or staying at a hotel, all usually involving some sort of sales or excise tax.
Maybe in California, but not in some of these tiny Northeastern states. Come to think of it, that’s one reason why tolls are so common up there. It’s the only way to get revenue from someone who is driving through the state without stopping.
There really is NO equitable system in my view, for instance in South Carolina the sales tax on grocery purchases is two percent versus eight percent on most other consumer goods. On the other hand the sales tax on all restaurant meals, including fast food sandwiches, is TEN percent. The bright idea was that tourists would pay this tax and therefore benefit the state. The problem is that most of those people eating in the restaurants are local so Joe Smo who works for peanuts pays more in taxes for his burger and fries than the whole cost with tax included used to be when I was a young man. Taxing agencies are only interested in raising taxes, they don’t give a damn whether the taxpayer is being bled dry.
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