Introduction
Transportation infrastructure is the physical framework that supports the movement of people and goods across a country. This framework includes roads, highways, bridges, airports, public transit systems, and more. Building and maintaining efficient transportation infrastructure is essential for a strong economy, from stocking grocery store shelves to work commutes. However, transportation infrastructure in the United States has fallen into disrepair. In 2021, the American Society of Civil Engineers gave the United States a C- for its infrastructure, and in 2020, 32% of urban roads were in unsatisfactory condition. Overall, there is a widely-established need for improved transportation infrastructure in the U.S., yet addressing this problem requires a discussion of how funding should be divided between state and federal authorities. The way transportation is funded influences people’s interactions with infrastructure, such as their demand and travel behaviors, because various funding methods have different effects.
Arguments in Favor of State-Level Funding
Proponents of increased state-level funding argue that the states should be responsible for reversing the decline of transportation infrastructure in the U.S., since states have more than one way to source funding for projects. States typically pay for infrastructure projects either by borrowing funds or through taxes and fees. Overall, states pay for around 36% of transportation infrastructure projects in the U.S. Thirty percent of transportation infrastructure is funded through state borrowing. The borrowing method has been shown to have greater benefits for bigger projects, as the costs of large investments are spread out over several years. Alternatively, state taxes and fees – including gasoline taxes and road tolls – pay for 6% of transportation infrastructure in the U.S. The share of local government spending on public transit is increasing, but the share of local government spending on roads is declining.
Historically, infrastructure development was reserved as a state responsibility. The federal government has expanded its role in this area in recent decades, specifically with grants-in-aid programs. Through these programs, states receive federal funds with requirements attached that dictate how the funds should be spent. Critics argue that these regulatory controls are causing the federal government to micromanage state activities with no apparent benefit, and that grants-in-aid programs should thus be phased out.
Generally, proponents of state funding for transportation infrastructure argue that states are better positioned to understand and address the unique needs of their area. They point to evidence that state highway maintenance spending is critical for improving the quality of roads and bridges since states can tailor spending to local conditions. Additionally, proponents of increased state funding argue that federal infrastructure funding encourages overspending. They say that federal policymakers aim to maximize subsidies for their states, and consequently may not consider the efficiency and effectiveness of the funded programs. For example, supporters of state funding believe that the Infrastructure and Investment in Jobs Act, which directed federal funds towards several infrastructure projects, had a questionable return on investment. They posit that if states were instead given the autonomy to fund infrastructure projects, each dollar spent would have a greater effect on infrastructure improvement since states are not allowed to run deficits like the federal government.
Arguments in Favor of Federal Funding
The federal government traditionally funds transportation infrastructure through the aforementioned grants to states, and covers about one-fourth of highway and transit spending in the U.S. This money is sourced primarily from individual income taxes, corporate income taxes, and payroll taxes.
Proponents of increased federal funding argue that federal backing generates more trust and buy-in from involved parties, from lenders to transit agencies. They claim that this enhanced buy-in encourages larger research and development budgets, supports domestic manufacturing, helps deliver projects faster due to increased lender trust, and improves infrastructure quality due to more reliable maintenance of materials.
Moreover, supporters argue that federal funding is more equitable than state level funding due to its revenue sources. Federal revenue sources rely on progressive taxation models such as income taxes; these tax wealthier people at higher rates than lower-income people. On the other hand, state funding relies on regressive taxation, such as sales and fuel taxes; these tax everyone at the same rate. Regressive taxation systems take a larger share of low-income people’s resources, and are thus inequitable. Because of this, proponents of federal transportation funding hold that using federal funding is the only way to spread the tax burden of large transportation projects equitably.
Others argue that federal funding promotes long-term sustainability in transportation projects, with respect to both durability and climate consciousness. Due to its larger budget, proponents claim the federal government is able to prioritize long-term benefits over band-aid fixes. Additionally, supporters emphasize that states tend to be less consistent in funding long-term projects, so federal funding prevents infrastructure in lower-income states from falling behind infrastructure in higher-income states.
Conclusion
As the government works to modernize American transportation infrastructure, the debate over funding revolves around the principles of federalism, as both states and the federal government will ultimately contribute to building and maintaining infrastructure. Each level of government’s share of responsibility and control greatly impacts the quality of American infrastructure. As this issue evolves, it is important to consider the ramifications of each infrastructure project and its funding sources on local communities.
