How long would it take for a gas tax to be effective?

Question: How long would it take for a gas tax to be effective?

Answer: The full question asked by Garth Brazelton was: "Assuming there is even a decent effect on reducing congestion and reducing gas consumption, how long would it take for that to happen? What level of tax increase would you need to set to make that happen? $1 as Mankiw thinks, or $3 as another study thinks? Or nothing? And which assumptions of those models are correct or not?"

For the second part, that's more a consideration of what the "ideal" Pigovian tax should be. I discussed that in The Gas Tax - Answering NoPigou's Questions when I stated:

Now as for setting the rates of the tax - changes to these rates are typically appear in a budget, such as Finance Minister Paul Martin's 1995 budget where the unleaded gasoline rate increased from 8.5 to 10 cents per litre. We all know that setting the rate is an inherently political process, with all the horse trading and sausage making that goes on in any political process. But unless Mr. Corcoran has a plan to repeal the Excise Tax Act, this is going to go on anyway.

I believe that figuring out what the "optimal" Pigovian tax rate is a largely a blackboard exercise and a red herring as far as setting public policy, because we all know that governments are not simply going to implement the rate an economist tells them to. As long as we do not exceed the optimal rate, there is no issue. Even if we do, we're already exceeding the "optimal" tax rate for almost every other tax under the sun, so an "excessive" Pigovian tax may still not be an issue if it used to offset other taxes. However, given how unlikely a massive increase in the gasoline tax is, I believe we need not worry about passing the optimal point.

As far as how long it would take for a gas tax to reduce consumption, we saw in How would a gas tax reduce consumption by enough to make it worthwhile?, that with a 10% rise in gasoline costs, we should expect consumption to drop 2-3% in less than a year, and 5-6% over the span of a few years.

In the next section, we consider a different policy option:

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