Should Infrastructure Spending Be State, Local or Federal?

We shouldn't be raising the federal gas tax to pay for local infrastructure projects.


Road construction
Martin Finnerty/

With the Trump administration's proposal to add $200 billion of federal funding for transportation projects over the next decade, there's a renewed debate about whether we should raise the federal gas tax. One side makes the argument that a 25-cents-per-gallon gasoline tax is needed and long overdue; the other side says the hike would cost consumers $71 billion, or 60 percent of the expected gains from the recent tax cuts. But neither side is asking a more fundamental question: Should the federal government be involved in infrastructure spending at all?

Yes, it is true that the federal gas tax of 18.4 cents per gallon hasn't been raised since 1993. It is also true that when adjusted for inflation, it has less purchasing power now. It is also correct that the gas tax hasn't been enough to cover the annual amounts that Congress has authorized to be spent on transportation infrastructure in recent years.

But it doesn't follow that the only acceptable policy option would be to hike the federal gas tax rate to cover frivolous overspending. An alternative would be to refrain from spending money we don't have, but that's a crazy thought in the D.C. swamp, where interest groups are rewarded with spending programs, whether they are paid for or not.

A better solution would be to return all public funding to state and local governments, where it belongs anyway. In a report titled "Who Owns U.S. Infrastructure?" the Cato Institute's Chris Edwards notes that 98 percent of U.S. streets and highways are owned by state and local governments. Indeed, contrary to common belief, most infrastructure projects are local in nature. And if they own the assets, state and local governments should also pay for them. Also, if they want to expand or maintain their infrastructure, they should go to their own taxpayers to raise the money based on the merits of the projects.

According to data from the American Petroleum Institute, unlike the federal rate, the average state gas taxes have gone up since 1994, from roughly 21 cents to 33 cents. In other words, states do not seem to have an issue with raising taxes for given projects.

State and local governments could also issue debt—which, sadly, is made easier by the tax exemption on municipal bond interest. Finally, they could go to the private sector for a public-private partnership.

All of those options would make those who spend money on infrastructure more accountable to those paying for it. Those options would also make more sense than the current system, which collects money in the state and sends it to the federal government, where bureaucrats take their cut before sending the money back to the states via politically designed formulas.

Unfortunately, people tend to be attached to the way things are, or, more accurately, to the idea they have of how the system functions. The truth is that it's been decades since the system has actually operated the way people think. For instance, the idea was that the tax would act as a "user fee," in the sense that those using the roads financed by the fund would effectively pay for it. But it's hardly the case, as general funds have been raided over the years to cover all the spending.

Also, as is often the case with government programs, the Highway Trust Fund expanded to cover transit and other parochial projects that did not benefit the nation as a whole and certainly didn't respond to the "user fees" model. With that expansion came additional increases in the gas tax—including one from 4 cents to 18.4 in 1993—until further attempts to increase it became politically unpopular.

Now is the time to rethink the way we fund our infrastructure. The best place to start would be to end the federal gas tax and let state and local governments raise and spend their own money for their own projects. That would behoove them to make the case to their taxpayers for what they really need, and it would free them from many of the tedious strings that are attached to government funding.

Everyone would benefit except D.C. bureaucrats. That's what I would call winning.

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  1. Make the Mexicans pay for it! They don’t get to vote here in the USA, so who cares about them anyway!?!?!?

    1. Why stop with Mexicans? I would tax all foreigners living abroad.

      1. I’m making over $7k a month working part time. I kept hearing other people tell me how much money they can make online so I decided to look into it. Well, it was all true and has totally changed my life.

        This is what I do…

      2. I’m making over $7k a month working part time. I kept hearing other people tell me how much money they can make online so I decided to look into it. Well, it was all true and has totally changed my life.

        This is what I do…

    2. Lawful permanent residents may contribute to political campaigns–including Libertarian Party candidates. Since La Suprema Corte has authorized artificial people to buy elections, and the Nixon anti-libertarian law still taxes citizens to pay for looter party electioneering, it makes sense for resident aliens to help the LP earn the spoiler votes it takes to repeal cruel laws. Stopping the Feral Government from creating poverty abroad will reduce the flow of refugees. US-backed mystical prohibitionism is the primary cause of economic collapse, hence the waves of refugees.

  2. Should Infrastructure Spending Be State, Local or Federal

    There’s no authorization in the constitution for the federal government to be spending money on infrastructure including the interstate highways. So that was easy.

    1. Article I, Section 8:

      To establish post offices and post roads;

      Postal roads that go from state to state are interstates. Of course, no postal delivery happens on interstates but postal trucks transporting mail from region to region does.

      As with most things, states should collect most of the revenue and spend it as the states sees fit to.

      1. Postal monopoly to facilitate tariff and prohibition enforcement led to the economy-destroying Comstock laws. It is no coincidence that courier services started up in 1929, when the Hoover Administration sent agents to rob, imprison and murder people over things like beer and coke, and strangled mail volume by some 15%. Lysander Spooner wisely sought to add competition which the Constitution does not forbid.

        1. All that may be but postal roads are an enumerated federal duty.

          1. “a road or route over which post is carried and along which post houses were formerly sited”…

            Well, where are ‘post houses’ today? Post Office locations? Not usually on any specific roads, just located where land is cheap or central to a city.

            “A road or route over which post is carried”?! Well, the mail carrier drives past my house six days a week, so is my residential street a “post road” and should the Feds maintain it? Why does my city’s road crew repair potholes and repave every once in a while, as needed (or some indeterminate time After the Need is there)?

            With a definition like that, the rule or sentence should be stricken from the books! It’s so non-specific as to be useless!

    2. There is authorization for Congress to tax and spend. The Constitution doesn’t have to list out every single thing Congress is permitted to spend on for it to be constitutional.

      1. The old “general welfare” clause, eh?

  3. Normally, I would be for usage tax to pay what you use but the states and fed already collects billions in gas taxes and waste that money.

    Those useless electronic signs, landscaping, and other costs added to construction costs that have nothing to do with making the road is paved correctly.

    BTW: Overcrowding our current interstate system in cities is another reason that we don’t need floods of immigrants to make it worse. Get our roads fixed to handle the traffic we already have and then let more immigrants into the USA.

    1. Man, is there any problem that your massive police state can’t fix?

      1. The only problem is they can’t seem to keep the immigrants out.

    2. Get our roads fixed to handle the traffic we already have and then let more immigrants into the USA.

      That’s not how traffic works. You build capacity, more people will drive more miles, until roads again approach capacity, and you’re back at the same problem. That’s why Atlanta and so much of Texas is a mess of highways now.

      I’m not sure where you’re getting the idea that landscaping is needlessly inflating the costs of highway construction. Local governments aren’t applying for federal grants to beautify their highways. They’re constructing monstrous interchanges, full of spaghetti-like ramps and overpasses. Those things can cost billions of dollars to construct. No one is planting flowers on them.

      1. Atlanta is in a mess because it *hasn’t* significantly expanded its highways in twenty years, and there are more than two million more people living here now than there were twenty years ago.

      2. Not adding highways or lanes doesn’t help either.

  4. The federal highway system spun off of California’s added highways after nuclear weapons became known. Highways made These States into a huge airport, facilitated evacuation of crowded areas and simplified post-attack logistics. These, like power plants, the CDC and individual rights for women, have a common defense component it is not wise to overlook.

    1. The federal interstate system was copied from the Autobahn road system in Nazi Germany.

      Eisenhower saw it first hand and knew it would be a boom to American business.

      If you travel older state roads, you can see why travel across the USA was more difficult back then. Communities divert roads into towns for business traffic, roads are not always marked well, and some communities changed road names several times along its length.

      1. For some strange reason, the roads built by FDR during the Great Depression we’re paths through parks. If our second Progressive president had decided to build highways for low income people instead of scenic routes for rich people, starving people in the cities could move to rural areas where the farmers were dumping food on the ground because they lacked customers.

      2. Speaking of the Nazis, I heard something about them moving people by trains, but the fascists had a reputation for making the trains run on time.

    2. That is a valid point. Eisenhower noticed how the German highway system played a major role in World War II. If we want peace we must prepare for war.

    3. Yeah, the interstate highway evacuation of Houston prior to Hurricane Rita caused more fatalities than the hurricane.

  5. The current funding model, whereunder the Feds collect taxes and then dole the money out in transportation grants to the states, provides a means of helping Americans despite the obstacles created by the Tenth Amendment.

    When Washington decided that speed limits needed to be lowered to 55 mph, and later when they decided that the drinking age needed to be raised to 21 throughout the country, and again, when they decided that the legal blood-alcohol level should be capped at 0.08%, they didn’t have an enumerated power that allowed them to do so directly. Instead, they left it up to the states?but states that didn’t go along lost their federal transportation funds.

    Returning responsibility for building and maintaining the highway system to the states would deprive the Feds of this valuable tool for protecting the lives of our precious children.

  6. All of those options would make those who spend money on infrastructure more accountable to those paying for it.

    Which is exactly why states won’t use their taxing power to raise the revenue they think is necessary for infrastructure spending (or any other spending) when they can get the feds to take the blame for their profligacy.

  7. Should Infrastructure Spending Be State, Local or Federal?


    1. Bingo.
      Freeways are crowded because they are free (at least while you use them).
      Freeways are dangerous because the government isn’t liable for deaths caused by poor design.
      Freeways cost to much to build and take to long to repair or upgrade because government contracts are rife with corruption.

      A private owner would make roadways safer and cheaper and use rush hour pricing.

  8. Only the specific duties spelled out in the constitution should be federal responsibility and federally funded. All others should be a state responsibility, which they can delegate to a locality or not, as they see fit in that state.
    And unicorns should be a protected species, which is equally likely.

  9. I can see the argument for federal infrastructure spending on truly interstate highways, like the 2-digit ones.

    But the three-digit ones are there purely to ease congestion in a city, so those should be state- and city-level concerns.

    1. Yeah, I was on the 110 the other day wondering why it’s designated an Interstate when it begins and ends in Los Angeles county.

      1. The three digit interstates beginning with an odd number are spur roads connecting a city or something to an interstate. For instance, I-185 connects Columbus GA to I-85 to the north. I believe I-110 connects Long Beach Harbor to I-10. It also carries a whole lot of commuter traffic, but so does everything paved in LA, including driveways!
        Three digit interstates beginning with an even number are bypass or loop roads to avoid a city center.

    2. Not always. I-275 around Cincinnati goes through Ohio, Kentucky, and Indiana; I-495 (aka The Beltway) goes through Maryland and Virginia, and there are plenty of other examples. For that matter, not all the 2dis go between states: I-2, I-4, I-16, I-37, I-45, I-27, I-43, I-96, I-17, I-19 all are contained within a state. For that matter, Hawaii has H-1, H-2, and H-3.

  10. I’m pretty sure as a libertarian the answer is none of the above. Leave it up private enterprise.

    1. I guess for that you’d have to have the debate on whether or not roads are a legitimate thing for government to be building and maintaining. And there’s a lot of reason to argue in favor of that. For example, roads since time immemorial have been critical for national defense. They are what made Rome capable of not only the conquest of most of Europe with a very small army, but also allowed them to maintain the state and its defense. Having very well maintained roads in the US is critical for the defense of our nation in the future, should the Pax Americana come to an end, or should a true rival finally rise up.

      “All roadz should be private owned easements” is really an anarchist’s argument by nature.

    2. One of the problems with the federal version is that it stifles toll roads. How do you sell the idea of privatization to a locality when they can see their tax dollars at the pump going straight to the feds, who then spend it in other states on massive projects.

  11. I like the article and I am very much in favor of decreased federal involvement. My only concern is that there are a few states that I drive through using interstate highways that have low population and would struggle to pay for them. People from out of state benefit from them as much or more than those that live within those states (Montana, Wyoming, Idaho, etc.)

    I would instead prefer that the federal government only spend money to maintain federal interstate highways more than 20 miles away from a city or town with a population above 1000 people. This would hopefully allow for the existing federal gas tax to be cut in half. If we dropped ALL federal funding, I would fear that many interstate highways in remote areas would become unusable because there isn’t any local population that cares. Some interstate highways are used almost exclusively for long distance interstate travel.

    1. Generally agree with your comment but 1K is way small. A better metric would be an estimate/evalution of in vs out of state road use.

    2. I’d suggest that states use tolls rather than general revenue to build and maintain the kind of long-distance highway that King Lamoni describes. This would place the cost on those who use the highway, be they locals or be they coast-to-coast truckers.

      This would also prevent a certain amount of politics-driven waste and inefficiency in the highway system. In my rural state, for instance, there’s currently a great deal of clamor for the construction of an expressway system, to be financed out of the state’s general fund. Four-lane highways are to be built, not because the volume of traffic demands it, but because newspapers and Chambers of Commerce and state legislators want them. I suspect that we’d see a lot less support for such unnecessary projects if the locals knew that they’d have to pay tolls to cover the costs.

      1. Since modern technology makes toll roads less of a hassle (but still a hassle), this may be easier to manage. (Although there will be an issue for people unable to get credit cards or other credit and other issues for differing state systems using differing transponder technology, but I suppose that would eventually iron out.)

        Trucking would be wildly against this idea, however. The Teamsters don’t have the clout they once had but the various trucking company owners that would end up having to raise rates and compete more directly with other shipping methods would likely fight this tooth and nail. Right now, trucking is subsidized by passenger autos in that autos pay more per mile relative to the damage the lighter cars do to the road. Big rigs do a heck of a lot more damage and pay less.

        If we want to do a consumption-based fee in order to correctly price road maintenance, trucks will pay a heck of a lot more. As a side benefit, we’ll need to get away from gas taxes anyways as electric vehicles don’t pay them. So some new form of funding will be needed regardless.

    3. My only concern is that there are a few states that I drive through using interstate highways that have low population and would struggle to pay for them. People from out of state benefit from them as much or more than those that live within those states (Montana, Wyoming, Idaho, etc.)

      Let the market decide whether a highway needs to run through Wyoming. If trucking companies and tourists want to finance it, let them. If they can’t, why build it?

      What you’ve got hiding right here is the libertarian case for environmentalism. If we weren’t subsidizing highways to nowhere, maybe we’d have more untouched frontier, without the need for the federal government to grab huge swaths of it.

  12. I have no issue with returning transportation funding to state governments provided 100% of the tax money is also returned (in this case in the form of proportional income tax reductions and gas tax eliminations.)

    King Lamoni’s consideration for certain interstate roads as matter of defense is well taken.

    I’d also add a caution: states like California might choose to let portions of I-15 rot into uselessness in order to discourage so much cash driving to Vegas on the weekends and staying in Nevada. California might be happier to have that cash have a good time in the California economy instead. So don’t count out the Chris Christie-like temptation for states to use roads as political weapons against each other. This is also an area where the Feds can make a positive difference.

    One of libertarianism’s biggest blind spots (that is shares with Marxism) is ascribing unrealistic behavior to human beings. Assuming that people will make rational choices with their money is foolish and unsupported by fact (see: Las Vegas. Pet Rocks. ) People will do things for spite or political gain or just because they had a bad day.

  13. The key consideration that gets lost here is the interest rate on federal debt. The one benefit of passing tax dollars up through DC before parsing it out to the states – even if it were a straight dollar-for-dollar remittance – is the ability to leverage up that those tax dollars with cheap federal debt. It’s the smart way to finance these projects.

    That said, I am all for localizing and internalizing the costs of road construction and maintenance. Public-private partnerships don’t tend to work out very well, because local politicians are unsophisticated and have short time horizons (i.e., until the next election) and private partners tend to be people like Trump, i.e., with lots of money, driven only by the desire for more of it, and with few moral scruples. So they tend to negotiate these jaw-dropping concessions and guarantees that puts taxpayers on the hook. Seems in theory like a great idea, but it’s just another form of public corruption in practice. Mileage-based local taxes and user fees for publicly-funded construction and maintenance is probably the best way to go.

  14. “Also, as is often the case with government programs, the Highway Trust Fund expanded to cover transit and other parochial projects that did not benefit the nation as a whole and certainly didn’t respond to the “user fees” model. ”

    You could also argue this DID help because it reduced the wear and tear on those same roads. Moving more people via public transit or bike lanes or what have you keeps you from having to repave the roads nearly as often. It’s just more efficient to move people by themselves rather than their cars too.

  15. Should Infrastructure Spending Be State, Local or Federal?


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