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Ideas: Appropriate use of taxation - Phil's Rambling Rants
September 15th, 2005
08:48 pm

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Ideas: Appropriate use of taxation

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From:peteralway
Date:September 16th, 2005 02:39 am (UTC)
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I have a foggy memory of an economics class I took more than 20 years ago. There was a concept that often when you buy something, there are more costs to society than the costs of the person who buys the thing. There was some swell technical term for that. Essentially the idea was that if you buy something whose manufacture pollutes the water by some increment, that water pollution costs the people downstream from it some amount that they aren't getting compensated for. Or maybe the manufacturer clogs up traffic in the area. Or use of the product increases the incidence of asthma. There are other costs like that that might not be environmental. Say, oil imported from the Middle East requires that the government maintain an expensive military presence in the area. Anyway, the theory is that taxation should cover those costs. Cigarette taxes would cover that portion of the medical costs of smoking that aren't covered by the smoker--either because the government ends up paying, or they are effects on non-smokers who inhale the stuff.

COnsarn it. There was a technical term for that, but after 20+ years, I've forgetten it.

Not that this is exactly what you are suggesting, but it is a related idea.
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From:tigertoy
Date:September 16th, 2005 03:36 am (UTC)
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The word you're looking for is externalities.

Where the externalities are readily measured in dollars, I don't think it's revolutionary to tax in proportion to them. Unfortunately, it is hard to place an unarguable dollar value on a child's health or an unspoiled landscape; I think government has to go farther than just the well recognized economic costs of activities when deciding they deserve to be restricted. Government is often willing to restrict freedom with laws and regulations without making an economic case for it, but much less willing to restrict freedom by taxing an activity.
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