The Antiplanner has long argued that transportation and other infrastructure should be paid for out of user fees, because user fees are the best indication that such projects will be truly productive. A report this month from the Congressional Budget Office reaches a similar conclusion.
The report observes that “carefully selected infrastructure projects can contribute to long-term economic growth,” but that “the potential gains from public spending for transportation and water infrastructure depends crucially on identifying economically justifiable projects.” In order to identify such projects, “the demand for infrastructure could be better aligned with the existing supply by putting a price on those services that reflects the full cost of using infrastructure.” This price should include “both the cost of providing infrastructure services and the costs that one person’s use imposes on others”–in other words, congestion pricing.
The report adds that the federal contribution to infrastructure projects should depend on “where the benefits are expected to accrue.” Projects that primarily provide local benefits should primarily be funded by the locals, while projects that provide more national benefits could get more federal funding. Federal funding of primarily local projects would “result in too many projects, or projects that are too expensive, being undertaken.”
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Of course, this begs the question of why, if users will pay for projects, the federal government should be involved at all. One answer, suggests the report, is that it is possible that some infrastructure “will be undersupplied if its provision is left to state and local governments or to the private sector.” However, CBO does not give any examples. CBO adds that “infrastructure spending can also mitigate losses in output and employment” during a recession–but even if this is true, there is still little reason for federal involvement when the economy is booming.
No matter how good the justification in theory, any federal spending on infrastructure is likely to become pork. In other words, it will be directed based on political power, not on actual need. Politically driven spending also focuses mainly on capital improvements and neglects maintenance and operations. State highways and bridges, which are mainly paid for out of user fees, are in pretty good shape. Local highways and bridges, as well as urban transit, are mainly paid for out of tax dollars, and they are in pretty poor shape. In evaluating infrastructure spending, the next Congress should look at user fees as the best indicator that infrastructure projects are worthwhile.
Throughout the late nineteenth century and into the early twentieth century, most state constitutions or civil statutes banned public funds from being spent on roadways and bridges and tunnels. This was because, at the time, they, wisely, recognized what a boondoggle such projects could be.
Roads and bridges and tunnels serve a wholly economic purpose. They aren’t built to enhance leisure; they are built to grease the wheels of commerce. As far as capital outlays are concerned, roads and bridges and tunnels fall in the same category and scale as subdivisions, skyscrapers, factories, refineries, and offshore oil rigs. Private funding is found for those outlays every day of the week.
If private actors won’t fund a road then it probably shouldn’t be built.
The Antiplanner wrote:
The Antiplanner has long argued that transportation and other infrastructure should be paid for out of user fees, because user fees are the best indication that such projects will be truly productive. A report this month from the Congressional Budget Office reaches a similar conclusion.
The biggest (and IMO the most-successful) public works project in the history of the United States (most of the “free” Interstate Highway system) was built with funding from “user fees” (a/k/a motor fuel taxes). Construction of tolled portions were mostly built revenue bonds which were in turn paid by “user fees” (a/k/a tolls). Some sections of the tolled system have been detolled and become part of the “free” Interstate system (such as most of I-95 in Connecticut that was the Conn. Turnpike and parts of I-95 and I-85 in Virginia that made up the Richmond-Petersburg Turnpike).
These funding schemes have served the nation well, though there has been irresistible pressure to divert significant portions of those user fees to projects that do not benefit highway users.
The report observes that “carefully selected infrastructure projects can contribute to long-term economic growth,†but that “the potential gains from public spending for transportation and water infrastructure depends crucially on identifying economically justifiable projects.†In order to identify such projects, “the demand for infrastructure could be better aligned with the existing supply by putting a price on those services that reflects the full cost of using infrastructure.†This price should include “both the cost of providing infrastructure services and the costs that one person’s use imposes on othersâ€â€“in other words, congestion pricing.
No problem with congestion pricing (or as some call it, “value” pricing), as long as the price charged gives a break to users in the “off hours” when demand is low or lower.
Of course, this begs the question of why, if users will pay for projects, the federal government should be involved at all.
I can think of a few reasons:
(1) Because the transportation system is a national system and serves the entire nation (and our NAFTA partners, too).
(2) Because some states (consider, for example, I-80 crossing Wyoming or I-95 crossing South Carolina) have low populations (especially along these corridors), but significant amounts of out-of-state traffic crossing from one side of the state to the other.
(3) Even if funding is left to the states (and it could be), there still need to be national standards for our highways when it comes to weight-bearing capacity, overhead clearances and traffic control devices and so on.
One answer, suggests the report, is that it is possible that some infrastructure “will be undersupplied if its provision is left to state and local governments or to the private sector.†However, CBO does not give any examples. CBO adds that “infrastructure spending can also mitigate losses in output and employment†during a recession–but even if this is true, there is still little reason for federal involvement when the economy is booming.
The bigger question is what to in the cases where new capacity is clearly needed (and in the national interest), but opposed by local elected officials and NIMBYist and environmental organizations.
The interstate highway system is a boondoggle. It was utterly un-needed.
It constituted a direct subsidy to the long haul trucking industry, a superfluous group, whose market niche had long been served, more efficiently on a per ton basis, by the railroads. Then it benefited suburban and exurban real estate developers secondarily. Intercity travel was already well served by trains and airplanes at the time it was started and still would be. Again, it was utterly un-needed.
Now we are saddled with an oversized, over-scaled, overengineered, overpriced set of roadways, bridges and tunnels. They are at the end of their useful life and need to either be repaired, rebuilt or removed. I would favor auctioning the whole system off to the private sector instead of using tax dollars to fix it.
I do take issue with O’Toole’s notion that the gas tax is a user fee. The gas tax is not a user fee. If it is then it is a most unfair one. A true user fee would be proportional to the use and/or wear and tear of the user. The federal gas tax is not structured that way. Every one pays the same tax per gallon. A Harley with a 800 cc engine pays the same tax per gallon as a tractor trailer with six axles.
The wear and tear on the road is in direct proportion to the cube of the axle weight. Thus, a thirty ton, six axle tractor trailer is going to cause several hundred times more wear and tear than an eight hundred pound Harley and should pay several hundred times the tax of the Harley. By that reckoning, a proper tax for a thirty ton tractor trailer would be at least forty dollars per gallon.
Toll road operaters know this and typically prohibit vehicles with more than three axles.
So the gas tax/userfee is actually a highly regressive tax. The smallest users pay the most and biggest users pay the least by several orders of magnitude and a direct transfer therefrom to the long haul trucking industry.
The only time I pay the gas tax, is when I’m using my car and I have to buy gas. When I had a motorcycle, it only took a couple gallons to fill the tank, about once a week. Much less than my car uses.
sprawl said:
“The only time I pay the gas tax, is when I’m using my car and I have to buy gas.”
Haha you silly peck.
Don’t you realize that you pay gas tax whenever you buy ANYTHING that was shipped using petroleum? You think the local grocery store doesn’t pass on the cost of shipping those tomatoes in your Turkey day salad up from Mexico via semi in late November? How ’bout the Turkey itself? That’s a lot of weight and a lot gas taxes. Just look at them diesel fuel tax summaries map. To bring me my food in the great pnw the semi has to go through two of the highest gas tax states in the country. Don’t even ask how much gas tax you’re paying on a bag of oranges from Florida if you live in New York. (Maybe those are flow in. There’s a gas tax on aviation fuel, right?)
I meant to add something about how that system is not sustainable, but who cares about sustainability anyway? Build more damns in the desert. Test some more nukes. Dump some more military diesel in the ocean. Sell some more old growth NATIONAL Forests to Japan or China. Build some more roads in national parks. Fly some more F-18s over my home in the summer to entertain the electorate.
Shit. I just realized. The federal government is the biggest polluter and degrader of resources in Amurika.
darn typ()s. damns? i’ve had a couple of new belgium rangers. tough week. japanese internment.
C.P. Zilliacus:
“These funding schemes have served the nation well, though there has been irresistible pressure to divert significant portions of those user fees to projects that do not benefit highway users.”
Gas taxes are not user fees. They are an excise tax on gasoline purchases. You pay them whether you drive on a Interstate Highway or US Highway or State Highway or not, but those are the only roads which get funded by them. You pay them when you buy fuel for your lawnmower, leaf blower, weed wacker, electrical generator, and snow blower. Oil and gas were taxed with excise taxes long before there was an organized federal road subsidization policy, and there is nothing about these items which logically forces them to only be taxed if the revenue is to be dedicated to roads. The excise taxes on beer, wine, phone calls, and tobacco do not go to fund the production of breweries, vintners, cell phones, and cigarettes, and no one argues that they should either. Gasoline taxes should be thought of in the same way – their purpose is to generate general revenue funds, not to facilitate the construction of more roads.
Excise taxes are simply another form of deriving necessary government revenue, but in a non-coercive and voluntary manner, such that only those who wish to must pay the tax. If you don’t want to pay gas taxes, you can always live a lifestyle which does not require a car. Millions of Americans do just that, just like teetotalers do not pay liquor taxes and non-smokers do not pay tobacco taxes.
A user fee is a tax paid only by the user of a system funded by that fee. Examples are National Park entrance fees, turnpike tolls, and airport ticket taxes.
“The Best Investment a Nation Ever Made: A Tribute to the Interstate Highway System” By Wendell Cox