The case for (and against) public subsidy for roads

David Levinson and I discuss the case for and against subsidy for roads at Streets.mn. Here are our concluding thoughts, so read the whole thing to find out how we got here:

So what is the net?
In the short run, states should raise their gas tax to replace the general (property tax) revenue from a baseline set by lowest common denominator jurisdiction within their domain with user charges. That is, figure out which jurisdiction spends the least per capita on roads, and raise the gas tax to replace the property tax by at least that amount of money for each jurisdiction. In all cases states should be extremely wary of using sales taxes to pay for roads. (States will also need to cover the declining federal gas tax, but that is separate.)
Over time, states should move toward a vehicle mileage fee varying by weight (for trucks and other heavy vehicles), location and time of day to replace the motor fuel tax. This should be phased in with EVs (and Hybrids) which don’t pay (much) motor fuel taxes, and trucks which would be charged for weight and distance, going first. Off-peak discounts would encourage peak-spreading. Rates would vary by area to account for different costs of running networks.
Road networks should be organized and operated like public utilities, managing to generate revenue from users to pay for cost of operations. Restrictions on usage should be allowed in this model, where auto and truck traffic can be limited to specific times of day or excluded altogether. Road design that allows access for emergency services can be regulated.

Are Roads Public Goods?

Michael Munger at Kids Prefer Cheese works through whether roads are public goods in the economic sense. He writes:

For many "surface" roads, in rural areas, there is no congestion, or at least none unless you get behind a tractor or school bus. And the cost of collecting fees would be prohibitive, particularly in the era before transponders when you would have need a toll booth at the end of every driveway or building entrance to measure when a car gets on and when it gets off. So, roads in that kind of setting are pretty close to public goods. Further, we can charge an excise tax on gasoline, which is close to being a linear fee on intensity of use. Heavier cars, and trucks, use more gas and so pay higher fees, and even smaller cars use twice as much gas to travel twice as far. So weight and distance travelled determine how much you pay in fees (gas taxes). Let's say rural roads look like they could be public goods.
Rural interstate, or limited access, highways are a closer call. The limited access part means that there are relatively few on/off ramps, and the development of transponders and licese plate cameras with computerized billing reduces the costs of collecting fees. Still, the use of the highway is generally not subject to congestion in rural areas. When Chateau, Angus, and I (once with Fred Flintstone) drove across Kansas (to get to the other side, so we could go skiing in Colorado), we spent long stretches of the night watching headlights coming from far away. Not many other cars out there on I-40 in January at 3 a.m. So, even though it is possible to collect fees, the marginal cost of road use (once the gasoline is taken out, and already taxed) is very close to zero. Probably still a public good, though you could argue the point.
But urban, limited access highways? Please, chile, get out my face. That's NOT a public good, not even close. Urban highways are notoriously subject to extreme crowding. Consequently, the marginal cost of being on the highway is positive. And it is cheap now to use electronic means to detect and collect road use fees. These fees can have different levels for different times of day generally, and even be "live," with different charges for different traffic conditions.

Lots of people have discussed these distinctions elsewhere, but the public/private distinction is often misused where whether or not the roads are publicly or privately supplied often confuses people as to whether the road is a public or private goods. I'll add that is some cases roads can and should be considered club goods or common goods.