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Curb Your Enthusiasm For Pigouvian Taxes, Victor Fleischer

Victor Fleischer

Pigouvian (or "corrective") taxes have been proposed or enacted on dozens of products and activities that may be harmful in excess: carbon, gasoline, fat, sugar, guns, cigarettes, alcohol, traffic, zoning, executive pay, and financial transactions, among others. Academics of all political stripes are mystified by the public’s inability to see the merits of using Pigouvian taxes more frequently to address serious social harms.

This enthusiasm for Pigouvian taxes should be tempered. A Pigouvian tax is easy to design—as a uniform excise tax—if one assumes that each individual causes the same amount of harm with each incremental increase in activity on …