Back in October Greg Mankiw published an article calling for a much higher gas tax. I am beginning to agree but for slightly different reasons. Though instead of just raising taxes, I would like to see the American people get something out of this that will improve the efficiency of government.
So here is my proposal: Keep the federal gas tax as is but eliminate the Federal Highway Trust Fund and instead dedicate the taxes to General Revenue.
This proposal removes the federal bureaucracy and federal legislature from funding decisions on highways, which are regarded as complete. I would like to return decision making for highway investment to state governments, who are closer to situation and thus able to make better decisions. Under this proposal states would not receive any highway funding from the federal government so they would be forced to find other alternatives such as raising their gas taxes or privatizing their highways along the Indiana Toll Road model.
The remaining federal gas taxes will fund the military expenditures that are increasingly necessary to guarantee the supply of oil from unstable regions like the middle east, which is a proper federal priority.
Our Federalist system calls for each state to look after its own interests and for the federal government to look after the interests of all of the states. Before we had completed the Interstate Highway System, road construction was a proper federal priority on national security grounds. As that system is now complete this proposal will serve to refocus federal attention on national security and refocus state and local attention on maintaining their roads.
The obvious problems with this proposal concern vested interests. The federal bureaucracy and legislature like the clout that come from telling the states how to spend money on roads and the State governments like to pass the buck to the federal government. Government at all levels needs to get serious about their proper priorities.