Wednesday, December 9, 2009

What To Do When They Try to Tax Your Twinkies Away From You

There's a new mad idea being murmured about by the intellectual elite. It's based on a new concept:"internalities". And, not surprising, the elite want to tax to correct those who "suffer" from internalities.

"Internalities" are supposedly situations where humans are "weak". They know that a Twinkie or a cigarette may be bad for them long term, but in the short term the desire is so strong that they indulge anyway. The elite are discussing taxing these "internalities," all in the name of helping you fight your bad (in their view) habits. Serious taxing of such products and habits will, of course, just drive the markets for such products underground where you could get jailed or killed trying to get your "internality" fix.

Taxes on "internalities" are what's known as Pigovian taxes, and Mario Rizzo in Part 2 of A Little Pigou Is A Dangerous Thing makes the complete argument for the problems with Pigovian internality taxes, here.

So study Rizzo, get the jargon down, and, the next time someone proposes taxing your Twinkies, tell them that there are serious problems with Pigovian taxes on internalities, including the problem of knowing the probability of harm, knowing how far the individual’s present behavior is from the optimum and, thirdly, tell them there is a temporal problem because there is no unique normative discount rate. Finally, tell them that the consequence of attempting to correct the “internality problem” through taxation will be the capture of the policy by those who have another agenda.

1 comment:

  1. Robert - based on that last paragraph I'm beginning to think you have spent tooooo much time in Washington, D.C.