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Do Higher Taxes Build Better Roads?

This question came to me when I was confronted with this chart [Fig 1] on the campaign website of Bob Stefanowski, who is at present the GOP nominee for Governor of Connecticut. I have no special connection to the state; however like many others on social media, I have a keen interest in electoral politics, and the deep blue state of Connecticut was said to be particularly competitive this year because of the unpopular liberal incumbent. Since Stefanowski is something of an outsider, I was interested to look up the themes and issues he was campaigning on.

Do Higher Taxes Build Better Roads?

Now, Stefanowski’s point here was to imply that previous Governors have mismanaged tax revenues and Connecticutans (Connecticutters ?) are simply being ripped off. However, if you delve deeper into the chart, which shows the relationship between percentage of roads in the state which are not in good condition and the date of tax freedom day (how many days worth of income the average person pays in taxes) for that state, it seems clear that states with higher tax burdens seem to have poor road quality as a rule, and this is not a phenomenon unique to Connecticut.

When I posted this chart to my Twitter Timeline, my ever-vigilant followers pointed out some issues with this chart. The first issue was bought up by Ryan Hassett (among others), who speculated that this effect was almost entirely driven by states suffering from long bouts of snow also having higher tax rates. If this was true, it would mean the chart’s implied result was spurious.

Another issue was bought up by transit analyst Alon Levy regarding the use of Tax Freedom day as a measure of tax burden. Since most taxes paid by Americans are to the federal government, Tax Freedom day is decided mostly by how rich people in a particular state are, not the state’s tax burden.

Yet another interesting point was made by Fred, who suspected that population density might explain this phenomenon.

Since these objections are very reasonable and also potentially devastating to the thesis of the original chart, I felt compelled to figure out if the results held, if we could find some way of addressing these deficiencies. In order to address these issues, I decided to obtain the following data:

  1. Percentage of roads in not “good” condition by state, from the Council of State Governments. {link}
  2. Average Snow days per year by state, from USA.com {link}
  3. Tax Foundations’s Facts and Figures about State and Local Taxes {link}
  4. Population Density for each state from Wikipedia {link}

Addressing the very first issue, I built a linear regression model of percentage of roads not in good condition versus average number of snow days in the state. I find that road quality is not related to snow (p-value for this is a very high 0.3) and it seems unlikely that snow can explain this phenomenon. Results of the regression are presented in [Fig 2]

Do Higher Taxes Build Better Roads?

Coming to Alon’s excellent point about tax burden, I extracted 2 figures for every state from Tax Foundation’s Facts and Figures book: State & Local Tax Collections per Capita and State-Local Tax Burdens. These metrics allow us to isolate the effect of state taxes and the second metric also allows us to control for how rich or poor a state is. In order to get a rough idea of how tax burdens across states look, [Fig 3] plots the second metric against road quality, with labels for state names.

Do Higher Taxes Build Better Roads?

Regressing and plotting per capita tax collections against road quality, we find a strong, robust relationship very similar to that in the original chart [Fig 4]. However, this relationship gets somewhat weaker if we use the second metric, which looks at State and Local Taxes as percentage of income [Fig 5]. These relationships are still statistically significant, with p-values of around 0.002.

Do Higher Taxes Build Better Roads?

Do Higher Taxes Build Better Roads?

Looking closely at the tax burden chart, you may have noticed that the relationship appears to be non-linear. For the states with the very lowest tax burdens, it seems road quality starts deteriorating as well. It seems like return to state taxes might follow a Laffer-curve like relationship: taxes either too low or too high are sub-optimal. To test this, I also tried out a more complicated quadratic model [Fig 6]. This model had a p-value of 0.001 and seems to imply that the optimal state tax burden might be at 7.5%.

Do Higher Taxes Build Better Roads?

Finally, we consider Fred’s suggestion of investigating the impact of population density on road quality. We investigate Linear Regression models of road quality against the logarithm of population density with and without excluding DC & Alaska. As [Fig 7] and [Fig 8] show, this relationship is pretty significant, roughly about the same magnitude as that of tax burden.

This suggests that as population density increases, costs of maintaining roads perhaps grow faster than the population size; i.e., the returns to scale are negative. Diego Beghin suggests a plausible explanation for this:

Do Higher Taxes Build Better Roads?

Do Higher Taxes Build Better Roads?


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32 thoughts on “Do Higher Taxes Build Better Roads?

  1. You could also look at the number of miles of road lane per state versus the average gasoline and diesel consumption per state, which should serve as a proxy for miles driven per mile of road. That might show if usage and wear is the problem. It’s also very inconvenient to do maintenance work on roads that always have high traffic.

    My state, Kentucky, has great roads, but perhaps it’s because they don’t get much wear because all our cars are up on blocks.

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    • There might also be a correlation with how much heavy truck or farm equipment traffic there is.

      Wear and tear on the roads apparently scales with the fourth power of axle weight. A semi truck weighing 15,000 lb per axle does 280,000 times as much damage to the roads it drives on, as a compact hatchback weighting 650 lb per axle, and 500,000,000 times as much damage as a person on a bicycle weighing 100 lb per axle.

      The disparity in tax bills between the truck driver, the hatchback driver, and the bike rider is probably smaller than the difference in the need for road repairs that their respective vehicles produce.

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    • You could also look at the number of miles of road lane per state versus the average gasoline and diesel consumption per state, which should serve as a proxy for miles driven per mile of road.

      This somewhat assumes that all states have an identical distribution of vehicular gas mileage. I mean, looking at that is better than nothing, but if one state is driving all 20 mpg trucks and the other is driving 40 mpg smart cars, you could have them both use the same amount of gas per of road mile but the first state actually has half the traffic. (OTOH, it has slightly _heavier_ traffic…but I don’t think the difference in road wear is noticeable between passenger vehicles?)

      That obviously is an exaggeration, but an actual important thing there is ‘how much of that fuel is being used by tractor trailers’. Those use more fuel than passenger vehicles, but I don’t think they use ‘enough’ proportionally to account for their added wear and tear on the roads. And there are some states that have a lot of through traffic of those, including many of the states singled out for having bad roads. (Mostly because they have ports.)

      It’s also very inconvenient to do maintenance work on roads that always have high traffic.

      Yeah. And in addition to the traffic of the road itself, the ability of the surrounding area to take that traffic can be relevant also.

      There are roads that cost more than other roads to maintain, even if the two roads are identically built and have the same wear, simply because one of the roads can be totally closed down and all the traffic diverted because the surrounding area can handle it, and the other cannot and must be repaired in a complicated piecemeal fashion.

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  2. They hypothesis here seems to be that high taxes lead to poor roads. I’m curious as to what mechanism of action you imagine might have that effect.

    Given the correlation you’ve noted, the basic possibilities seem to be

    1) Spurious correlation

    2) Higher taxes cause worse roads

    3) Worse roads cause higher taxes

    4) Worse roads and higher taxes share a common cause.

    I can think of mechanisms of action for 3 (road repair costs money; having expenses is a leading cause of needing revenue), and 4 (the mentality that the main job of government is to make sure citizens don’t encounter potholes goes along with seeing costly things like healthcare, a social safety net, dealing productively with addictions, etc. as fripperies to be cut to the bone to lower taxes). Trying to think of a mechanism for 2 – I got nothin.

    3 is fully in effect in my city – decades of city administration deferred road repairs and infrastructure expansion to avoid raising taxes, until the roads got so bad, and the road and public transit networks so insufficient that people started demanding they be fixed even at the cost of higher taxes, and stopped electing “the taxes are too damn high” candidates.

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    • Part of the problem that Colorado Springs had was that it felt like somebody somewhere was playing hardball.

      Manitou Springs had legalized recreational marijuana sales. They used the additional tax revenue for potholes. (“Pot For Potholes”, they called it.)

      Colorado Springs does *NOT* have recreational. Medicinal only. (You need a card and to be entered into a database and everything.) We had potholes. So we passed a tax back in 2016. 2C. It passed overwhelmingly.

      We still had billions upon billions of potholes all throughout 2017.

      People got *PISSED*.

      Anyway, they seem to have gotten fixed this year.

      (From here, it feels like “money is fungible” shenanigans going on as well… but people keep pointing at Manitou’s pristine roads…)

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    • 2) Higher taxes cause worse roads
      Trying to think of a mechanism for 2 – I got nothin.

      We are, right now, looking at pension costs squeezing all other gov activities. We’re also looking at various politicians trying to raise taxes to kick the can down the road.

      So increasing taxes can be a sign of bad management of/by/from the government. Whether that’s today or last decade doesn’t matter.

      Taxes go up to pay off “group X”. Funding for maintaining roads gets diverted for the same reason.

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    • So, I have tried to avoid putting in any political angle to this. I think its more that higher taxes and worse roads both happen in states where public sector unions are more powerful and push state governments towards spending more on compensation than maintenance. In general there’s some economics research which suggests that higher unionization makes “industries” less efficient.

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  3. I’m not sure why anyone would posit any particular connection between road quality and general tax revenues. If you’re going on tax collections shouldn’t you look at, idk… road use taxes? You know, that 10/15/20 cents per gallon you pay at the pump, supposedly earmarked specifically for road maintenance?

    I ply my trade on the nation’s highway network of course. (I’m a long-haul trucker if you’re new around here.) Road quality definitely varies between states but I think you would be hard-pressed to identify any unitary theory to explain the variance. Some roads get the crap beaten out of them by traffic that’s clearly over-stripped capacity and really fixing it would be a major and hugely expensive project (e.g., I-70 all the way through Missouri should be three lanes each direction), while others have climate issues that shorten the lifespan. Some places just seem allergic to spending money.

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    • I’m not sure why anyone would posit any particular connection between road quality and general tax revenues.

      I think it’s because of the most effective argument against anyone who periodically expresses a libertarianish sentiment involves interrupting them mid-sentence and yelling “WHO WILL BUILD THE ROADS?”

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    • This…

      Of course, you also need to know how much of that road tax is being spent on the actual roads. My state has drained off the road maint fees to cover the general fund shortcomings. This has caused a marked decline in the quality of roads.

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      • My state runs in the opposite direction. The fuel taxes are reserved for transportation, but are inadequate, so require supplementing from the state General Fund. Local property taxes are insufficient to cover school needs, so are supplemented from the state General Fund. Local sales taxes are barely adequate to cover local municipal needs, so are supplemented from the state General Fund. Since the 1990s, it has been clear that the state General Fund is a slow-motion train wreck. It’s been handled, by both parties, on a baling wire and duct tape basis.

        At some point we’re going to need a convention and a new state constitution to straighten things back out.

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  4. To riff off of DragonFrog’s point, how many of the high tax states with bad roads have major ports or trans-shipment hubs for road freight? CT has 3 deep water ports, and is near how many others? How much of that freight is moved in and out of the ports by rail versus by truck? Are the roads being used to move the freight properly designed to handle that tonnage? How often do trucks deviate from designated trucks routes and onto roads not designed for it?

    Can we find a map that maybe color codes the roads by condition? Does CT have bad roads because heavy traffic (per axle) is tearing them up? Or does CT have bad roads because they have to dedicate an inordinate amount of transportation budget to a small number of key corridors, and the rest of the state is left to hang? I mean, if you have a couple of key bridges that are aging faster than expected, keeping those bridges up and safe can consume incredible amounts of budget every year, especially if politicians are dickering over the pain of replacing the bridge.

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  5. I think it’s because of the most effective argument against anyone who periodically expresses a libertarianish sentiment involves interrupting them mid-sentence and yelling “WHO WILL BUILD THE ROADS?”

    I think the complete argument should be “Who will build the roads without recourse to eminent domain?”

    SORRY, this was supposed to be an answer to

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  6. As an aside, my aunt wrote for the Chigao Tribune for decades, and she related a story to me about a huge pothole that was in front of the newspaper office. They kept calling the city and calling the city, but the pothole wasn’t getting repaired. So one morning she had an inspiration. She went to a street vendor and bought a bunch of flowers, placed them in the pothole, took a picture, and ran the photo in the paper captioned “Mayor Daley’s new pothole beautifcation program.” The pothole was fixed the next day.

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  7. I can think of a few other potential issues, just off the top of my head:

    1. Do the SALT numbers account for toll roads? California, for example, has very few stretches of highway with mandatory tolls (but does have toll bridges). States like Texas seem to have tolls on many highways.

    2. How are we counting privatized roads (e.g., if Texas gives a road to a private group to use to extract tolls, and a portion of those tolls keep the road in good shape, how are we counting that on this chart?)

    3. Where is the input for road condition coming from? And how is it counting residential streets vs. highways, if at all?

    4. How do tax rates compare to money spent on road maintenance? For example, if CT is (a) high-tax; (b) facing lots of damaged roads; and (c) spending little on maintenance, that would be one thing. If, however, it spends a lot on maintenance but still has bad roads given aging infrastructure and harsh-on-roads weather, that would be another thing.

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  8. Great post!!! Always better to look at the numbers over blindly speculating.

    I’ve long believed that tax receipts don’t drive expenditures, so I don’t think that high taxes drive bad roads. Rather, there’s probably some other set of factors that contribute to both. However, this does imply that raising taxes doesn’t necessarily get us better public services.

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  9. j r: Rather, there’s probably some other set of factors that contribute to both

    Yes, this is what I suspect too. That stronger public sector unions get us both higher govt spending and also less efficient maintenance of infrastructure.

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    • It’s probably not one thing. It’s likely that CT, NY, NJ, MA, CA, etc. have high taxes because they have relatively high populations of wealthy people and a culture that makes high taxes OK. The people who have money and a high enough dislike for taxes move to Florida or Texas.

      And they probably have infrastructure problems because the population density of major cities matched with the overlapping jurisdictions of the “major metropolitan area” make it difficult to administer.

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      • Yeah the last matters a lot. It’s not roads, but look at the endless infighting over the NYC subway system, which is falling to pieces as everybody blames everybody else for it instead of doing anything about it.

        I also wouldn’t be surprised if that kind of diffusion of responsibility makes some unique opportunities for corruption.

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        • This is what I mean by higher taxes getting us worse politicians. The more money and power a polity has to toss around, the more likely you are to attract politicians who aren’t very good at running a polity, but are very good at networking and favors and payoffs and taking care of themselves and their ‘friends’ while making a show of running a polity.

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        • The problem with that is roads are a diffused part of the infrastructure, meaning different parts are controlled by different agencies in their entirety, whereas a subway is by necessity controlled (partially) by multiple jurisdictions.

          So, a state highway or a federal freeway or a city road etc. all seem part of a states bad roads, they are in reality repaired by different entities. On the other hand, a subway (or light rail, monorail, what have you) is generally a single agency who is answerable to multiple bodies. Ie the worst of all worlds.

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          • So, a state highway or a federal freeway or a city road etc. all seem part of a states bad roads, they are in reality repaired by different entities. On the other hand, a subway (or light rail, monorail, what have you) is generally a single agency who is answerable to multiple bodies. Ie the worst of all worlds.

            This would explain why a subway is terrible compared to it’s roads, but NY also has terrible roads.

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  10. Nice post Damon, its always nice to see some regressions on the site. I do have a few questions:
    1) Am I right in thinking you created those plots with ggplot2?
    2) Did you look into doing any multivariate regressions?
    3) All these graphs seem to be really sensitive to 2-3 points right at the end of the data (New Jersey, Connecticut, New York and possibly Alaska on the other side), perhaps these states have some unobserved factor in common? Have you considered testing the sensitivity of the results to these points?

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    • Hey James, thanks for the questions.

      1) Yes, I am not really a pro though, and I learned quite a few things making this, which was fun !

      2) Yes, I tried doing a multi-variate model with both population density and tax burden and it seems to perform only slightly better than the tax burden only model.

      3) it does seem like DC and Alaska are outliers, especially on the population graph, which is why I did try some regressions excluding those, and it only had a significant effect on the population one.

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