Financing roads and railways with decentralized real estate taxes: the case of Sweden

Roads and railways in Sweden are mainly financed with national government taxes. However, the regional distribution of benefits differs widely from that of tax payments. As a consequence, overspending is likely to occur. A condition for efficiency is that the collective of users should pay for such projects. Therefore, we propose a new regional order for financing projects: government expenditures for transportation projects should be transferred to regions as well as the real estate tax to finance them. We present estimates of the size of such expenditures and of the income from real estate taxes following decentralization to regions.