August 10, 2015

The Road to Better Transportation Funding

Robert Krol

Senior Affiliated Scholar
Summary

There are economically worthwhile transportation infrastructure projects that need funding, but given the limited tax funds available, it makes sense to target the funds to get the biggest bang for the buck. Since the completion of the Interstate Highway System in the 1980s, politicians in Washington have failed to do this. It's time to shift responsibility for the provision of transportation infrastructure back to cities and states.

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The House of Representatives and Senate were unable to agree on a long-term highway funding bill. Instead, both chambers approved a highway funding extension that will cover spending until the end of October. As you listen to senators and congressman, you might think the only issue is how to find funds to maintain the current system. There is little discussion of serious reform. Current transportation spending is often driven more by politics than economic merit. Funds are diverted to non-highway uses and unnecessary regulations drive up project costs. These short-term patches increase policy uncertainty, harming the economy. Big-time reform is needed.

The Republicans have taken raising the gasoline tax off the table. The president proposed using a portion of corporate taxes to make up for the shortfall between gasoline tax revenues and highway spending, and Republicans in the House have shown interest in this proposal. But while reforming the corporate tax code is long overdue, legislators should not entangle it in the highway funding morass.

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