Re:How Washington Can Support Entrepreneurs
by philwelch on Wednesday May 27, 2009 @07:40PM
(#629428)
"Taxing the negative externality behavior doesn't have the aim of eliminating it -- just causing it to be weighed properly in the firm's decisions."
But it does tend to reduce the externality, thus reducing tax base. Which interferes with revenue collection.
But, you do have a point because 'proper' tax rates for negative externalities only pay for abatement/offset of the externalities' harm. You can't count exclusively on such taxes to pay for other unrelated public goods. (If you did, you'd be overtaxing the externality, causing underproduction of the related goods, which can be just as damaging to overall welfare as the original unabated negative externalities...)