Sure, Leave Gas Tax Collection to Liberal Tax-and-Spend States Like Georgia

One nay-sayer argument against greater federal spending for transportation goes like this: “Too many faceless bureaucrats in Washington have too much control over how states spend their money. Let states raise their own revenues and spend them as they wish.”

Georgia Gov. Nathan Deal wants to freeze the state gas tax. Photo: ##http://www.beaconcastmedia.com/politics/Senate-Democrats-Vow-To-Take-To-The-Streets-In-Battle-over-HOPE-Reforms--2851##The Beacon##

Besides, they say, the national government is broke. There’s no more money to spend on roads and trains.

There are a hundred reasons why leaving transportation revenue collection and spending to the states is a bad idea. First, states are in a worse fiscal crisis right now than the feds – in part because they have a balanced-budget requirement, meaning they can’t overspend their revenues in lean times. Second, just because I don’t live in Kansas or West Virginia doesn’t mean I don’t have an interest in those states’ infrastructure, when so much of what I buy rides the roads and rails of those states to reach me. And I start to care a lot about the infrastructure of New Jersey when I travel to New York from Washington.

But here’s another reason: it’s not that much easier to gain public support for raising taxes at the state or local level than at the national level.

Georgia Governor Nathan Deal is asking state legislators to approve his state gas tax freeze – saving drivers 1.6 cents a gallon, but costing the state $30 million. New York legislators have also drunk the tax-holiday Kool-Aid, despite the fact that it would cost the state $19 million over just three weekends. Massachusetts Governor Deval Patrick is trying to raise the gas tax, and Sen. Scott Brown is giving him a hard time about it. A Connecticut state senator is going around getting petition signatures against raising the state gas tax. Gas station owners in Carson Valley, Nevada are running their own campaign to keep the county from raising the gas tax five cents — which would just bring it on par with the neighboring county.

There is evidence that when voters know exactly what the revenues will go toward – and it will benefit them – they support higher taxes. But that doesn’t mean raising taxes is ever easy — even if it’s just to replace a federal tax that used to be in place. Once a tax is gone, you can bet people will fight against re-implementation. For proof, just look at the fight brewing over merely extending the federal gas tax that’s been in place for decades.

  • Rmathur

    This post misses two key points. Transportation funds are typically held in a trust fund, at both the state and federal level. Therefore, the balanced budget requirement on the states has no impact (revenue coming in = spending going out). Second, it’s hard to extrapolate from current state gas tax battles to what would happen if the entire federal gas tax was abolished. Most states would likely seek to offset the benefit to consumers by raising their own taxes to the federal levels. That would have no impact on the taxes faced by the consumer (they likely don’t care if their tax dollars are going to the fed or state gov’t).

  • I think this misses the important donor/donee debate as well.  I live in a city that gets shorted by the inherent bias of the US Senate in favor of rural states.  Assuming states took up the taxable capacity vacated by the feds, cities would get a fairer shake.

  • I think this misses the important donor/donee debate as well.  I live in a city that gets shorted by the inherent bias of the US Senate in favor of rural states.  Assuming states took up the taxable capacity vacated by the feds, cities would get a fairer shake.

  • Anonymous

    The reason the federal government shouldn’t spend money on local transportation projects is because the federal government is too corrupt.  It’s the tragedy of the commons: each local representative tries to stuff as many projects into their district because the cost gets divided among the entire nation.  When states need to make their own cost-benefit decisions on transportation the ones getting the benefit generally are the ones paying the bill.  Any economics student will tell you that’s going to generate smarter investment.  There’s simply no way the federal government is going to ever attain magical enlightenment and start acting in the global best interest: it’s all about “I consume, other’s pay”.

    The problem isn’t too little federal spending, the problem is too much spending on car infrastructure.  The free market simply can’t compete with the highly subsidized model of individual auto ownership.  Focus primarily on reducing that subsidy.

  • Dale Danley

    Tanya, Many folks are offended by the koolaid metaphor, which is a deeply disrespectful to the memory of hundreds of people who were murdered in 1978. It’s also kind of lazy writing that doesn’t say much. 
    Otherwise, love the work.