Do you approve of Pigovian taxes? These are taxes levied on seemingly undesirable behavior in order to compensate for their negative impact on society.
soda tax: Among other municipalities, New York State and Philadelphia are proposing soda taxes.
bag tax: Implemented in Washington D.C. as of January 1, a five cents tax on plastic bags.
911 tax: In Tracy, CA, if you call 911, it will cost you. Some people are deciding that a cab is cheaper.
elevated library late fees: In San Jose, CA an overdue library book could cost you 50 cents a day.
The Economic Lesson
Pigovian taxes, named after economist Arthur Pigou (1877-1959), are based on the idea that undesirable behavior creates a cost for society. Therefore, a tax is essentially a “payback” that offsets the cost and/or minimizes the behavior because it becomes more expensive. The negative result is also called a negative externality.
