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In a country where the government does not collect taxes, who pays for roads/highways?

A little background on the government (it's a work in progress): This government's single purpose is to eliminate the need for its citizens to worry about outside threats while allowing the citizens to act independently from external entities. This means the government will have resources to create a defense strategy from "outsiders" but have no influence on how things are "ran" inside the country. Basically the people live in a sort of anarchy-bubble surrounded by outsider-protection.

NOTE: Realist, modern-day setting. Country could be anywhere from 10M - 1B in population. Due to the issue of "how does a government function without taxes?", assume that the government does not collect taxes for use in road construction/maintenance.

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  • $\begingroup$ How big is the country ? What is your setting (realist, magic, futurist, etc.) ? $\endgroup$ – Babika Babaka May 3 '16 at 17:29
  • $\begingroup$ We need more context here. What does "government does not collect taxes" mean? No income tax? Or no tax of any kind? How does the government run elections? How does it pay for courts? Law enforcement? Why do you think that they have roads? Maybe they only have paths. $\endgroup$ – Brythan May 3 '16 at 18:44
  • $\begingroup$ @Brythan This is actually what I'm still figuring out. I used roads/highways since that is what started my thinking process on all this. Maybe I should have made the question be "How can a government be funded without taxes?" $\endgroup$ – Programmer May 3 '16 at 18:52
  • $\begingroup$ That's an example from hard-line libretarians. Look up their material for the ideas on how this is preferred/practical using current technology. $\endgroup$ – JDługosz May 3 '16 at 19:43
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    $\begingroup$ This question currently has three reopen votes and needs two more to be reopened. $\endgroup$ – a CVn May 4 '16 at 7:38
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If roads get built at all, they will probably institute some sort of toll system. If everyone who uses your road pays a toll, then you should be able to make enough money to pay off whatever it took to build the road.

Also, if you have a business you want customers to frequent, it's in your best interests to make a road to get there. So if you have the money, you'll pay for the roads, and hopefully gain back your money when your business profits.

An extension of this is that pretty much everybody is going to benefit from roads. If there is no tax for roadbuilding, you may just band together with your village or a guild of merchants and hire someone to build the roads you need. Or if all you need is a dirt road through the forest, it'll build itself if you use it enough.

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  • $\begingroup$ Those are great points. How could a toll system be implemented within a city where there are many "work-arounds" to evade the tolls (inner city streets not highways)? $\endgroup$ – Programmer May 3 '16 at 17:38
  • $\begingroup$ @Hooplehead24 In that case, they'd probably go with the second approach. If you can't get people to pay to use the road, you pay to maintain it because it benefits you to have good roads around your business. $\endgroup$ – DaaaahWhoosh May 3 '16 at 17:50
  • $\begingroup$ It's also conceivable that a group of people would work together, set up toll booths at the city entry points (of which there are likely only a relative few) and charge people entering or exiting the town, then spread the proceeds. Basically doing something similar to a government collecting taxes, but based on a different selection of people to pay. $\endgroup$ – a CVn May 3 '16 at 20:13
  • $\begingroup$ @Hooplehead24 If there's no government to collect taxes, why would there be free to drive on inner city streets to avoid the highways with? $\endgroup$ – ckersch May 10 '16 at 14:03
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In a no tax environment the roads would be build and paid for by private companies. They would probably charge a toll for using their roads.

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That's what toll roads are for. The people who use the road end up paying for it.

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  • $\begingroup$ If every road in a country was a toll road, the toll could be considered as a tax, because basically every citizen would have to pay in order to get out of his house. $\endgroup$ – A. Darwin May 3 '16 at 17:02
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    $\begingroup$ Not everyone gets out much. Commercial traffic would pay the bulk of it. $\endgroup$ – JDługosz May 3 '16 at 19:44
  • $\begingroup$ @JDługosz So what you're saying is, commercial traffic pays a higher road tax. $\endgroup$ – Benubird Jul 9 '18 at 14:14
  • $\begingroup$ Oh, they do, in real life. I’ve heard it said that the roads basically belong to the long-haul truckers; we just get to use them too because they’re there. I think that referred to Interstate funded highways, but I really don’t recall the source. $\endgroup$ – JDługosz Jul 9 '18 at 22:26
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I'd like to update the classic/obvious toll road answer by pointing out the parallels with the newer digital content economy.

With intellectual property, the creation takes effort and time and resources, but use has become nearly free to distribute and reproduce.

Besides the model of strictly buying/leasing what to use, we have seen ideas such as levels of service where there are limited free access and better paid access. There are subscriptions and "as a service" deals, add-based, and others.

In real life with taxes, it is commercial traffic that pays the most. The interstate system is built for trucking inyerstate commerce. So just like software may be free for personal use while business licences make the real money, you may get ideas like that. Free for personal use at a basic level of service; priority to commercial use; lower-cost personal licences available giving better service (like HOV lanes today, priority in getting in during high traffic, etc.)

Local bolivards might be paid by the businesses located along them, just as they pay for water and power: pay to maintain roads for their customers to come to them! For residential areas, private funding akin to Home Owners Associations that exist today.

Don't forget ads.

In all cases, I'm supposing that usage monitering is easy and automatic: RFID or something, no toll booths on every intersection.

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This is a matter of budgets. To really answer this question, we need to take a look at a hard figure - namely, we need to know how much it costs to actually build a road. Then, and only then, can we work out who can realistically afford a road.

I'm going to take the United States infrastructure as a model in this regard simply because it a) has been building roads for a long time, b) publishes figures in an easily-accessible manner online, and c) is a nation with varied environments supporting ~300 million people, which falls nicely into the bracket of your proposed country. Let's say a priori that we want to be able to reproduce the extent of the American road infrastructure as it is today, and see who will step up to the occasion.

According to the United States Department of Transportation's FAQ page on how much it costs to build a mile of road:

There is no single answer to this question. Construction costs per mile of road depend on location, terrain, type of construction, number of lanes, lane width, durability, number of bridges, etc. It costs more to build a new road than to rehabilitate a road or add lanes. Roads cost more to build in urban areas than in rural areas. Roads in mountainous terrain are more expensive to build than roads on flat land.

Nonetheless, some states have developed cost models to guide planning for their highway construction programs. These models give a ballpark figure for various kinds of highway improvements. The following are some examples:

  • Construct a new 2-lane undivided road: about \$2 million to \$3 million per mile in rural areas, about \$3 million to \$5 million in urban areas.
  • Construct a new 4-lane highway: \$4 million to \$6 million per mile in rural and suburban areas, \$8 million to \$10 million per mile in urban areas.
  • Construct a new 6-lane Interstate highway: about \$7 million per mile in rural areas, \$11 million or more per mile in urban areas.
  • Mill and resurface a 4-lane road – about \$1.25 million per mile.
  • Expand an Interstate Highway from four lanes to six lanes – about \$4 million per mile.

In order to reproduce the entirety of the United States' road infrastructure, you would need to lay out a total of 4.12 million miles of roads. Assuming improbably that the average cost of a road per mile is the low, low figure of 1 million dollars per mile, this still amounts to roughly 4 trillion dollars over the lifetime of the road construction (which, at least in the States, has been in the works for over one hundred years - so every year, about 40 billion would have to have been spent on roads).

It gets worse. According to the Virginia Department of Transportation,

It can take years to build a road because of the enormous amount of work that is involved. It usually takes at least two or three years, and sometimes 10 or more. Before construction begins, years of homework must be done. The environmental, social and economic impact of a road must be studied. Permits must be secured; homes, businesses and utilities in the path of the road must be relocated. Often, it's a matter of waiting for funds to be available. During construction, there are thousands of details that require attention, and unexpected circumstances can cause delays. The weather is a major factor. A day of rain can cause a three-day delay while the ground dries out. It can take nearly a month for concrete to harden to its maximum strength. Sometimes materials are not delivered on schedule; other times workers may find underground streams that must be protected or rock hidden below the surface that must be moved.

So, right off the bat, we know a couple of important things:

  • Anyone looking to pay for and maintain a road is looking for a really long-term commitment to recoup investment, anywhere between 3 to worst-case 10 years.
  • They must be willing to go significantly out-of-pocket or be able to raise the relevant funds as/when needed, as there is no chance of recovering their invested money until road construction is finished.
  • They must have access to raw technical talent in the mining and construction fields, and need an existing supply infrastructure for the delivery of raw materials.

So who do we know who fits (and will foot) this bill?

Option 1: Private Rich Individuals, or Conglomeration Thereof

We can look to the richest of the rich, those with a net worth in excess of 1 billion dollars. These could be philanthropic folk, or folks who see roads as an opportunity to improve their existing businesses.

One obvious choice includes car magnates: the Henry Fords of the world who've invested in manufacturing and building cars. These folks have incentive to invest in roads - as a way to improve their main business - and have a steady income generated every year that will tide them over. By the time they look to road-building, they've already amassed a sizable fortune, so they can't have started out as car magnates but instead in similar fields: manufacturing, perhaps.

The other obvious choice includes construction and mining moguls. These folks already have a dedicated shipping infrastructure and have access to highly talented folk who've done this sort of thing before. They would certainly be interested in expanding their construction efforts and activities, and would understand the technicalities of the enterprise better than their car magnate competitors. They'd recoup their costs by running tolls for as long as the roads are maintained.

Both of these profiles have incentive to invest in roads, are able to survive the long-haul period between construction and return on investment, and have the skills to pull it off. According to Wikipedia, some of the wealthiest individuals in history have come from these two backgrounds: Andrew Carnegie the steel magnate was worth over 372 billion dollars (adjusted for inflation) while Henry Ford was worth the smaller (but no less impressive) sum of 188 billion dollars. So: could they pull it off?

No, or at least not to the same scale the modern government could.

It is immediately obvious that, even given the scale of these individuals' wealth, they fall far short of the trillions needed to reproduce American infrastructure entirety. Nor can they promise long-term dedication: when the mogul dies, the immediate future of any projects is instantly in jeopardy, or may be put on hold, or shut down as their heirs decide they want to have no truck with their share of the business, nor will existing projects necessarily fall into people's hands. In their lifetime, they would only be able to cover a small fraction of the total American infrastructure - even assuming an impressive 400 billion in net worth, a lone individual could not build more than 400,000 miles of roads (assuming average cost of 1 million dollars per mile for construction) without exhausting his/her resources completely.

Could a collection of private individuals do it in partnership? Perhaps, but think of the competing interests: these private individuals would have to come from fairly similar backgrounds and share the same incentives, lest the one undercut the other. Business partnerships are quite tricky, thanks to the two-bosses problem in management. While it's possible for them to pull it off and even give it the lasting momentum to survive their deaths, I'm far more convinced they'd simply not work well together. Plus, what if your country just doesn't have enough billionaires?

Simply put, it's possible, but unlikely to have lasting impact on the state of roads. Long term road construction and resources are just more resources than a lone individual could feasibly provide, while a collection of individuals would have to be fairly cohesive to pull this off.

Option 2: Established Corporations

These are the mammoth corporations of the world. They've diversified into twenty different departments and fifteen hundred different products, and are now simply too big to fail. Their collective wealth outstrips that of entire countries. It's not clear what got them motivated in roads - maybe they took notice of the demand and decided it was time to diversify yet again, or maybe they thought of it as just another investment connecting their empires together - but they're here, they have the money, and they're willing to roll.

Can they do it?

Maybe. Lone corporations have been large enough at some point to be worth trillions of dollars, such as Saudi Aramco (3.6 trillion dollars). Because they're a money-making business and have been involved in so many different ventures, they understand the ins-and-outs of tackling new territories. They can more than absorb the initial costs, and they salivate at the prospect of a steady, continuous revenue stream for decades on end with reduced operating costs. There is certainly no reason why they couldn't pull it off, assuming there exists a company of suitably sufficient size.

However, there is one black cloud on the horizon: competition. In the absence of competition, this company becomes a major monopoly. Because of the high entry barrier for this business, an established business has more of an advantage than anyone trying to break in to the same field. It has the ability to leverage high costs on the ordinary citizen to a far more pervasive degree than any monopoly in the world without the accompanying moral incentive to help improve their lives, and this effectively makes them tyrants. In the presence of competition, there is some room to breathe - but then it just devolves into a Netscape vs. IE war or a Boeing vs. Airbus feud, with only one eventual winner in sight. In the best case, maybe none of this happens, and our corporate dictator is fairly benevolent throughout its lifetime. In the worst and more likely case? Sayonara to the life you know and love.

Of course, all this is predicated on the assumption that such a large corporation can exist in the first place. It would have to take a surprising coincidence - a non-regulatory government and a trillion-dollar corporation from the same place? - for this to work.

Option 3: Startups

Where there is demand, there are entrepreneurial spirits who have a dream. Young idealistic college dropouts who see the future in 'bringing the world together'. Grizzled industry veterans who see the promise of a fresh start doing exclusively road-making. Startups mushroom and flower, staking their entire life on the prospect of roads making them rich.

Can they do it?

Hell no. This business requires a) significantly deeper pockets than ordinary individuals could provide, b) long return on investment times, and c) significant expertise, as we've already established. Startups are busy scrambling after all of that, and are more likely to fail than succeed. A startup that could acquire the relevant funds would either have to take out the world's largest business loan or attract an extraordinary amount of crowdfunding - neither of which predict its long-term success or ability to grow.

Maybe there's a moonshot out there, but the odds are too high against it, in my opinion.

Option 4: The Government, but Without Tax Revenue

Imagine a government tasked solely with protecting borders and preventing foreign incursions. In the event of land-based incursions, the government needs to rapidly move troops. Hell, it needs a way to be able to maintain troops. It needs materials, rapid transportation systems, air-to-air defense strategies, the works.

There is no way for a government to do this realistically without some funding, so even though it doesn't collect taxes, we must assume they have some sort of funding. More importantly, there is no way for a government to actually accomplish this without some underlying infrastructure to support ground-based movements. Since the government doesn't collect taxes, the government simply earmarks some of its funds for building and maintaining roads, in the same way it recruits and maintains troops.

Can it be done?

Maybe. This time, the government has no incentive in making its roads open to the public - these are military pathways only, and they help make life easier. The government would have to contract to an external provider and is interested in the cheapest possible roads while maximising utility. It certainly has no incentive to rebuild the modern level of highway infrastructure - just the bare minimum necessary to accomplish its goals. Assuming the government doesn't have access to the same level of revenue it used to, it'll also take longer than a modern taxation-based government for it to accomplish its goals.

It could certainly happen, but the only person to benefit would be the government.

Option 5: Crowdfunding / Volunteer Labour

In an anarchic country, people are finally free. No longer do they have to withstand the yoke of oppressive government - no, now they can hold their heads high and declare themselves truly rid of the pestilence of Big Brother. But they have a problem: they need to get to work, but to get to work, they need cars, and to use cars they need roads.

Because there's no reason people can't work together, they either do one of two things:

  • They collectively agree to shell out a piece of their income to pay for the cost of a road being built around their immediate communities.
  • They actually volunteer to get this built in their spare time. Some people like the work - it gets them out of the house, they say, into the fresh air, teaches them valuable skills, and lets them really enjoy the miracle that is nature and doing valuable service to the community.

All across the country, people elect to try out one or two of these methods. Can the task of rebuilding infrastructure be done?

No. Or to be more precise, they can, but there'll be an element of centralized coordinated planning that will be missing. Immediate neighbouring towns that are frequented by citizens will be connected, while highways designed to handle mass transit and simplify urban planning may or may not get built. People will more likely build and maintain dirt roads simply because it saves on expense, and, yes, private citizens have done this before. But there is simply no way that a mass of people, separated by large distances, will coordinate for free and with no immediate short-term gains (after all, think of the opportunity costs involved in dedicating each of those hours) will ever completely reproduce the extent of modern infrastructure.

It's worth pointing out that in England and since Tudor times, local parishes were responsible for road organisation and maintenance in their own stretch, but eventually became a state responsibility simply because they didn't always get the required or necessary funds to ensure road maintenance. It's a fairly valid example of the limitations of small-town resources. Coordinating between towns means that, everytime there's a shortfall in one town, it delays or impacts road qualities elsewhere.

Conclusion

I think it is safe to say that the quality, calibre and nature of your roads just will not be the same without a government using tax revenue for the purpose.

  • The only people who can reproduce your roads to the scale that the modern-day American government has (a useful model) have to be exceedingly rich. In a poor country with limited financial reserves and entrepreneurship, it is unlikely that long-term infrastructure investment at this scale could be pulled off without massive cash infusions to sustain the effort for private corporations or individuals.

  • A government that does build roads but with only militaristic aims in mind using its own non-tax funds is unlikely to allow civilian access to their roads, nor will it have the massive resources to pull off what it could be before either.

  • Private citizens operating in their spare time just wouldn't have the same dedicated commitment or really invest in organised planning. They have no incentive to, and tons of other commitments. Even if they chipped in a small amount of their income, towns with smaller populations would not be able to afford to pay for major roads. Centralised planning is necessary, and in an anarchic setting not as easily done as liked.

It's not impossible for roads to be built in such a world: all it takes is time, effort, planning and money to build a stretch of road, and for short periods of time this can be accomplished without too much difficulty. Roads not designed to handle modern cars have been continuously built since circa 5000 BC, with tar-paved roads being built as early as the 8th century.

What is impossible is carefully reproducing the extent of road layout to the levels of the American government (say) or to the same quality. The United States has been building roads continuously for over a century, providing a long-term stability and guarantee for roads. No corporation or private individual would be able to affirm that long term dedication without the surety of immediate profits or without becoming a major monopoly with no check on their powers. Further, it takes a fair amount of technical know-how to be able to build structures like these in the first place, and even more financial incentive to be able to commission structures to handle a certain scale of traffic. No, I think with all of these factors, if you want a road system to parallel what the United States has today, you're plain out of luck.

Even if a private corporation (which we've ascertained through elimination is the only one to really guarantee this sort of support) took over roads and reproduced them to the extent of the American government over time, it simply becomes a major powerhouse, able to control the flow of commerce at will. It could hold entire towns hostage simply by closing sections or refusing to renew road contracts.

The only way out is for a collection of private corporations to compete for roads, but the long-haul nature of the work before profitability means there's a significant barrier to entry in the first place as well as a reliance on economic factors out of the company's control that means it becomes steadily more improbable for a competing body of companies to last: a non-monopoly is unmaintainable. From my perspective, you could then either have the monopolistic company turn out to be a benevolent dictator (unlikely - no incentive - and impossible to guarantee in the long-term) or have it be overtaken by force once enough roads are built and nationalised (in the sense that local areas take responsibility for maintaining their road patches), which is also unsustainable for the reasons elucidated.

Without a government collecting tax revenue, you can't enjoy the same quality or calibre of roads as you can today. That is the final word I have to say on this topic.

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    $\begingroup$ Why the downvote? $\endgroup$ – Akshat Mahajan May 10 '16 at 15:21
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This is a classic problem for libertarians.

Obvious possibilities are:

One: Tolls. A private company builds the roads and runs them for profit. This would work fine for long-distance roads, like U.S. interstate highways. It would likely be impractical for local roads where it has to be possible to get on and off just about anywhere: the expense of building and staffing a toll booth every ten feet would likely be wildly impractical. Maybe in a high-tech society you could have electronic sensors that automatically detect when a car enters the road and then you automatically send the driver a monthly bill, but even at that, the system of sensors is probably expensive to maintain.

There's also the problem: Most homes, businesses, etc have just one road leading to them. I mean there may be many possible routes to get there, but at the end there is usually just one road in front of that person's house. This creates an extreme monopoly problem: What happens if the company that owns the road in front of your house decides to increase the toll to something outrageous? Can they trap you in your house until you pay up or starve to death?

Two: Advertising. The owner of the road charges a fee to let advertisers put up billboards or the like along the road. This is, of course, how radio and many web sites are funded.

Same monopoly problem.

Three: Business ancillary service. Businesses pay for roads, as an ancillary service. Just like many businesses provide rest rooms, water fountains, etc, as a convenience to their customers. Or like trade groups fund standards organizations. Etc. Businesses might form an association to pay for the local roads in town. They have an incentive to provide decent roads so customers can drive to the business.

There is a free rider problem: What if some companies refuse to contribute? In some cases you could say, Tough on you then, we won't build a road to your store. But if there's a street with 100 stores and 2 or 3 refuse to contribute to maintain the street, the others can't just not maintain the street in front of those stores. Customers still have to drive over that part of the street to get to others. There are stores across the street and right next to them. Etc. Still, the same problem exists with other community services. What if one company refuses to contribute to a standards organization? The others grumble and ignore the problem. If the big boys contribute, the system can work, and the big boys know that if they don't contribute, the whole thing collapses.

Four: Streets are maintained as a public service by non-profit organizations, using voluntary contributions. Just like many people contribute to charities that help the poor.

Big free rider problem. But lots of people donate substantial sums to charity nevertheless, so it could work.

Possible catch: People will donate to charity because they know the money is going to help people who can't provide for themselves. (Unless the charity is a scam or is badly managed, but whatever.) But in the case of a road system, the beneficiaries will often be as rich or richer than the donors. Would people be less willing to donate under those circumstances? Maybe the rich would just be expected to pay more. Which leads to ...

Five: Rich people pay for roads as a public service, perhaps out of a feeling of obligation, of "giving back" to the community that made them rich, or for the prestige of having their name on it. Much like in the 1800s and 1900s rich people paid for parks and libraries.

Again, there's a free rider problem, but the rich patron doesn't care. He WANTS free riders. He puts big signs up that say, "Fred Smith Highway", and is pleased that every time someone uses the road they know he paid for it. Or he just has the personal satisfaction of saying, Yes, I make this town possible by providing all the roads.

I'd add that if a society really faced this issue, it's likely that SOMEONE would come up with a creative and practical solution. When radio was first invented, lots of people said that it would obviously have to be run by the government, because there was no way to even know who was listening. How could you charge people to listen to your radio station? How could anyone possibly make a profit from a radio station, when there was no way to bill your customers? But then someone thought of funding it entirely through advertising. Today that seems simple and obvious, but at the time it was a radical idea. Not that advertising didn't exist before: newspapers and magazines routinely carried advertising. But no one thought of paying for something ONLY through advertising.

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Driver's License fees

Individuals pay a monthly fee to maintain their driving license, the fees are used to build and maintain roads.

Business Road Fees

Businesses pay a monthly fee, which goes towards maintaining the local road infrastructure.

Tolls & Mass use license

Highways are paid for by tolls, though interstate commerce pays for mass use licenses ... Trucks might have RFIDs so they can just drive through the truck lane without stopping.

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  • $\begingroup$ Interesting point with the Driver's license fees. Never thought of that. $\endgroup$ – Programmer May 10 '16 at 14:58
  • $\begingroup$ Driver's license fees: Well, that pretty much assumes that the government is running the highway system, as who else would have the power to impose such fees? So the drivers license fee is a tax. Which the premise of the question is that we're ruling this out. $\endgroup$ – Jay May 11 '16 at 2:38
  • $\begingroup$ Not necessarily; Having a license to drive in a locality could be much more related to paying for the road then to capability, and licensing issued by the road maintenance companies. They would still probably be concerned with ability (possibly more so than the gov't) since they would have to clean up wrecks and damage to the roads by careless driving. $\endgroup$ – aslum May 11 '16 at 4:08

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