MR readers will know that I favor a gas tax, at least if it is made part of a broader fiscal bargain, including spending cuts, favorable treatment for savings, and redoing the AMT, among other reforms. But note: I don’t want to replicate our current fiscal problems at higher levels of government spending. Then we would be left with no wiggle room, if and when the likely demographic crunch comes. If we are not careful, that is what a gas tax could lead to, so take my endorsement of the idea with that qualifier.
The best time to put on a gas tax is right after a big market-induced spike in prices. That means now, or more realistically after the November elections.
Yes I know about tax smoothing, but that is not the central consideration. The key question is how to get broader fiscal reform, while taxing some negative-externality activities.
When it comes to high gas prices, people can only get so upset at once. Plus they will never quite understand who is to blame for what. Why are prices high? Was it the government? The evil oil cartel? al Qaeda? The Chinese? Such signal extraction problems are beyond most voters.
Waiting for gas prices to fall is the least likely way to get from where we are to where we ought to be. I await, but do not expect, The Grand Fiscal Bargain.