February 16, 2006

February 16, 2006 | Commentary on Taxes

Cut out the meddle man

Follow the logic, if you can: The federal government is running deficits. The states are enjoying surpluses. And -- the federal government is shelling out billions to the states.

 

Hardly makes sense, yet that's exactly what's happening.

Last year, every state ran a budget surplus (except Arkansas, which finished dead even). Illinois finished the year $315 million in the black. But that didn't keep states from going, hat in hand, to Washington to ask for help. They remain convinced that the feds must help them pay for everything from state parks to public health.

However, depending on federal assistance is foolhardy. The more addicted to federal money state and local governments get, the less creative they become and the worse they govern. And by turning local issues into federal responsibilities, Congress robs the taxpayers of 49 states to "benefit" the taxpayers of one. That's unfair and unnecessary.

Consider just one program that's federally controlled, but shouldn't be: highway funding.

Washington rakes in 18.4 cents in taxes on every gallon of gasoline sold. It's supposed to return that windfall to the states that collect it. But federal funding comes with some strings attached. Nearly a quarter of the money is set aside for public-transit systems, meaning it can't be used for needed highway projects. Meanwhile, transit carries less than 2 percent of passengers, and only about 1 percent when New York City is excluded.

Now, if lawmakers in Illinois decide it's more important to expand the L than to widen I-55, that's their business. But it should be the local leaders who ride those trains or drive on those roads who determine how transportation money is spent, not federal lawmakers hundreds of miles away. That's why control of all federal gas tax money collected inside a state should be given to the state itself, as Rep. Jeff Flake (R-Ariz.) proposed in 2004.

Doing this also would prevent the unfair transfer of money from one state to another.

A study by the Environmental Working Group, a liberal watchdog in Washington, found that between 1998 and 2003, "commuters in 176 metropolitan areas paid a total of $20 billion more in federal gas taxes than they received in federal highway trust fund money for both transit and highways." And, the group noted, "The result of this funding shortfall is increased traffic congestion, fewer transit options and more sprawl in outlying areas that is paid for by the suburban drivers who are increasingly stuck in traffic in and around our nation's cities."

There's really no rhyme or reason to this income redistribution. Mississippi, the poorest state, pays more in gas taxes than it takes in. Connecticut, the richest state, gets more than it pays out. It's unfair to expect drivers in Meridian to subsidize roads in Mystic -- roads they'll probably never see or drive on.

The race for federal funding is so out of hand that private businesses are making money on it. The Thompson Publishing Group puts out a newsletter called the "Local/State Funding Report," which gives communities "concise snapshots of what federal, corporate and foundation programs are all about."

Thompson brags that for a mere $7 a week, communities will know what federal money is available to them. "Finding -- and winning -- federal funding has never been more critical," the publisher says. That, in a nutshell, is the problem, and that is what must change.

Illinois shouldn't have to beg for handouts from Washington. The state can afford to pay its own way, and then some.

Congress should tell the federal bureaucrats to step aside. If it would stop forcing states to filter billions of dollars through Washington, we'd all enjoy the benefits: a more efficient government that can do more for less.

Ed Feulner is president of The Heritage Foundation (heritage.org), a Washington-based public policy research institute.

About the Author

Edwin J. Feulner, Ph.D. Founder, Chairman of the Asian Studies Center, and Chung Ju-yung Fellow
Founder's Office

Related Issues: Taxes

First Appeared in the Chicago Sun-Times