HIGHWAY FINANCE THEORY AND PRACTICE

The purpose of the work reported herein was to produce a synthesis of highway finance theory and practice in developed countries. In the past, the actions of the Canadian provinces were based on a "benefit-taxation" view of highway finance to a greater extent than they are now. That is, they more explicitly linked the payment of certain taxes, such as the gasoline tax, to the cost of building and maintaining roads. This framework for highway finance died out during the 1950s and 1960s, even though a number of inquiries suggested that, if anything, an even stronger emphasis on a "user pay" approach was appropriate. The last of these inquiries was the recent Royal Commission on National Passenger Transportation which recommended a strong user-pay system with road prices set on the basis of efficiency as an objective of government policy. This represents a radical departure from the conventional approach to highway finance in Canada and most of the rest of the developed world. As the review of experience elsewhere shows , many other countries have also relied on conventional general taxation approaches to highway finance; this in spite of a great amount of literature suggesting alternatives such as an enhanced role for the private sector, greater use of toll facilities, and the introduction of "weight-distance taxes", "congestion pricing" or "externality charges." However, for provinces willing to experiment with non-conventional approaches -- and several provinces are now in the process of developing new approaches to highway finance -- plenty of models from which to choose are provided.