Taxing bad things

A lot of environmental economics literature revolves around the idea that we should tax ‘bad things’ more and tax ‘good things’ less. So we should tax (or fine) things like cigarettes, speeding on the road and greenhouse gas emissions heavily and go easy on, say, payroll tax (which is a tax on giving people jobs).

It’s a pretty attractive idea. You discourage the bad activities, you make some money which hopefully can be directed to repairing some of the damage done by those activities (eg direct cigarette revenues to public health) and you get the bonus of a sort of moral satisfaction that the ‘baddies’ have to pay.

I saw a cool version of this kind of tax recently on the Freakonomics website – police in New York (where else?) handing out fines to drivers who pushed in front of a line of other drivers waiting patiently to exit a highway.