NCPA - National Center for Policy Analysis

Devolving Transportation to the States

October 1, 1996

At least two-thirds of the states receive no net benefit from federal transportation programs funded by federal fuel taxes, say policy experts. They say those states would be better off if the taxes were repealed and transportation funding were devolved to cities and states.

According to a study by Robert Poole of the Reason Foundation, federal transportation funding is highly inefficient.

  • At first glance 21 states pay more in federal fuel taxes than they receive in funding, according to figures from the Federal Highway Administration.
  • But after adjusting for the real cost of federal funding 33 states are net losers.
  • Due to these costs, federal dollars spent on transportation are worth only between 73.5 percent and 83.5 percent as much as state dollars.
  • And large states fare the worst, with California receiving only 66 percent of the value of highway taxes paid, Texas only 58 percent and Florida only 56 percent.

Poole says these hidden costs include interest income that Highway Trust Fund balances don't earn, increased labor costs due to the Davis-Bacon Act and added overhead for federal grants.

Furthermore, a substantial portion of the Highway Trust Fund has been diverted to build and subsidize the operation of inefficient forms of mass transit.

  • Since 1964 the federal government has spent $130 billion in 1996 dollars on mass transit and the states $180 billion, estimates transit consultant Wendell Cox.
  • The most expensive projects are rail systems, which have reduced ridership because bus routes are altered to fit rail lines rather than passengers, concluded the Congressional Budget Office in 1988.
  • Removing federal transit subsidies and regulations would permit a 20 percent to 40 percent savings in transit costs, says Cox.

U.S. Sen. Connie Mack (R-FL) and Rep. John Kasich (R-OH) have proposed that all but two cents of the 14 cent federal gasoline tax be phased out to devolve transportation funding and operation to cities and states.

Source: Robert W. Poole Jr., "Defederalizing Transportation Funding," Policy Study No. 216, October 1996, Reason Foundation, 3415 S. Sepulveda Boulevard, Suite 400, Los Angeles, CA 90034, (310)391-2245.


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