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In: Economics

Let’s say that you’re a 20-something-year-old college student. Your campus is three hours away from your...

Let’s say that you’re a 20-something-year-old college student. Your campus is three hours away from your hometown. Every time you return home – about three times per semester – you notice that there’s some delay in traffic due to the deteriorating interstate highway or bridge. To what extent should the federal government use tax dollars to repair the roads?

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Expert Solution

Many Americans believe that drivers pay the full cost of the roads they use through gas taxes and other user fees. That has never been true, and it is less true now than at any other point in modern times.

Today, general taxes paid by all taxpayers cover nearly as much of the cost of building and maintaining highways as the gas tax and other fees paid by drivers. The purchasing power of gasoline taxes has declined as a result of inflation, improved vehicle fuel economy, and the recent stagnation in driving. As a result, so-called “user fees” cover a shrinking share of transportation costs.

The time has come for policy-makers to recognize something that has been true for years, but is especially true today: we all pay for America’s roads.

Short-term funding patches – even modest increases in the gas tax – won’t change that. Nor will they be enough to enable America to achieve a 21st century transportation system. Doing so will require bold rethinking of how we raise transportation money and how we spend it in the years to come.

Roads don’t pay for themselves.

Nearly as much of the cost of building and maintaining highways now comes from general taxes such as income and sales taxes (plus additional federal debt) as comes from gasoline taxes or other “user fees” on drivers. General taxes accounted for $69 billion of highway spending in 2012.
Roads pay for themselves less and less over time. In the 1960s and early 1970s, gas taxes and other fees on drivers covered more than 70 percent of the costs of highway construction and maintenance. The share of transportation costs covered by gasoline taxes is likely to continue to decline as a result of inflation, more fuel-efficient cars, and slower growth in driving.

One ongoing investment that state and federal transportation authorities must renew regularly is funding for construction, maintenance and replacement of highways.

Roadways need constant maintenance in order to keep them safe for use, and the federal government invests a lot of money to maintain our nation’s roadways. In addition to federal funding, every state has a set budget for maintenance and repair of highway infrastructure. The U.S. Congress has the final say in how much each state receives in federal funds for highway expenditures.

Transportation budgets tend to fluctuate according to need, the previous year’s spending and other factors. In 2007, $146 billion was spent maintaining highways, costs that included the building and operation of new highway infrastructure. Three quarters of the total funding came from state and local governments, while one quarter came from the federal government. Comparatively, in 2009, $41 billion in federal funding was spent on highways; of that, $39 billion went to capital projects while $2 billion was spent on operations and maintenance.

Increased Spending

Since 2009, highway infrastructure spending has begun to increase again; but some of this increase can be attributed to a rise in the cost of construction labor and materials. In 2014, a total of $416 billion was spent on highway and water infrastructure, $320 billion of which came from state and local government, with $112 billion for capital projects and $207 billion for operation and maintenance. The federal contribution amounted to $96 billion, of which $69 billion was for capital projects and $27 billion was for operation and maintenance. Of the $416 billion total, $165 billion was for highways alone, which includes national, state and local roads, bridges and tunnels. Mass transit spending amounted to $65 billion.

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