With Biden’s approval ratings in the toilet, he is finally doing something that might be mildly popular.  He is proposing a three-month “holiday” for federal gas taxes.

It seems that Biden and his handlers want to do anything that is destructive to civilization.  It is really beyond comprehension.  With the mid-term elections coming, apparently Biden and his handlers think it’s finally time to do something that might not be completely destructive.

While the idea of a gas tax holiday isn’t the worst idea in the world, it isn’t near the top either.

From a libertarian standpoint, it seems that we should support any tax reduction.  It means that the government will take less money from us.  The only problem is, that isn’t really the reality.

There is no proposed cut in spending to go along with the tax reduction.  If anything, the federal government just continues to spend as recklessly as ever, as tens of billions of dollars are being sent to Ukraine (or to weapons makers to send weapons to Ukraine).  It’s not clear how much of that money will be returned into a Biden bank account somewhere.

Some libertarians think we should support any tax cut no matter what.  I, personally, do not go that far.  If there were a tax proposal to give an extra deduction to anyone named Hillary Clinton, I wouldn’t support that.

Can you see how absolutes can sometimes get you in trouble?

If the federal gas tax is eliminated for a little while, it will have no immediate impact on federal spending.  They will just continue to borrow more.  This will continue until it isn’t possible any longer, and who knows how long that will be.  The Fed has apparently stopped buying government debt for now, so it will be up to foreign central banks or investors to buy the debt.  Without the Fed’s support, it will likely mean higher rates, unless there is a major fear of recession.

In this situation, I would probably rather have the small tax relief and just see a bigger deficit.  I try to think of whether I would support eliminating all federal taxes and just having the government run massive deficits, which will go hand-in-hand with monetary inflation over time.

Even though monetary inflation is very damaging to the economy and our living standards, I think I would still prefer not having any federal taxes.  The massive deficit couldn’t be sustained, as the Fed would be forced to stop buying debt to save the dollar, just as it is doing now.  It would eventually force Congress to reduce spending.

With this specific proposal, we would see just over 18 cents per gallon come off the price of gasoline.  It is likely it would reduce the price by this much, at least at the start.  The problem is that the price is constantly fluctuating.  So the price of gas might be lower than it otherwise would have been, but it could still go higher even without the federal tax.

The Lesser Evil of Taxes

I don’t like any taxes.  I think it would be possible to live in a society without any forced taxation.  If you had very minimal government, it could be funded entirely just by a few rich people.  There could be voluntary taxation, where maybe you only get the benefit of the court system if you pay in a small amount.

Aside from that, some taxes are better than others.  Some are more invasive than others.  Some are more burdensome than others.  Some are more fair than others.

In the case of a gasoline tax, it makes some sense as long as the government is in the business of road building.  The electric vehicles ruin this a little bit, but anyone using a vehicle powered by gas is paying an approximate equivalent in gas taxes to how much they are using the roads.

And let’s face it; you don’t really have to do anything with the gas taxes except pay them as part of the price of your gas.  It is an extra burden for those collecting the tax, which in this case applies to those selling gasoline to consumers.  But compared to the income tax, the gas tax is not complicated or particularly burdensome to comply with.

And while every tax distorts economic activity in some way, a relatively low gas tax probably doesn’t cause major distortions, especially when the amount generally stays the same.

So I would rather see Biden “give” an income tax holiday.  The income tax is far more burdensome in many ways than the federal gas tax.

Supply and Demand

There is another downside to this temporary tax cut proposal.  The gas prices have skyrocketed, which is obviously the reason for doing this tax holiday.  It is probably a combination of Federal Reserve monetary inflation and a bad energy policy coming out of Washington DC.

If Biden wanted to do something helpful that wouldn’t increase the deficit even more, he could relax regulations and stop saying that we are trying to move away from oil and coal and things that the greenies don’t like.

Aside from that, sometimes there isn’t much to do except to stay out of the way.  Unless Biden is going to shut down the Federal Reserve or allow competing currencies, then there isn’t a whole lot to do to bring down gas prices without making us worse off in other ways.

Economists say that the best solution for high prices is high prices.  In other words, when the price is high, it gives incentive to suppliers to supply more, and it gives incentive to consumers to consume less.

If you eliminate the gas tax, it may initially reduce prices.  This shouldn’t really impact the supply side of things, but it could impact consumption on the margin.  Maybe some people will use a little more gas than they otherwise would have, thus driving the price up more.

In other words, we may not even get the full benefit of the 18-cent reduction per gallon.  We will never know for sure because we don’t know what it would have been like if there had been no tax holiday (or vice versa).  That is the conundrum of economics.  We can’t experiment in a vacuum.

Anyway, 18 cents per gallon isn’t all that much compared to how much prices have risen over the last several months.  If you put 10 to 11 gallons in your tank, you will save about 2 bucks.  Instead of 50 dollars, you may pay 48.

For people who were forced out of their job due to Biden’s vaccine mandates, I don’t think an extra 2 bucks in their pocket when filling their car is going to change their view of him.