1. DOUBLE BILLING---it forces double the payments, causing negligence. The only solution would be shoehorning the tax.

Second, however, there is a danger of double billing for harm that arises if both corrective taxes and liability are imposed (this point is independently made in Logue [2010, p. 2362]). If parties have to pay for more than the harms for which they are responsible, they could be induced to take wasteful precautions or be discouraged from engaging in socially desirable activities. If a firm were subject to a pollution tax for expected harm and were also strictly liable for actual harm, it would in effect be paying for twice the harm it caused.

This problem of excessive payments under a regime with both taxes and liability would be less serious under the negligence rule than under strict liability. Indeed, if the negligence rule functioned flawlessly, parties would always choose to act in a nonnegligent way and would never be found liable. Therefore, the problem of excessive payments would not arise, which would make the joint use of corrective taxation and the negligence rule attractive (taxation would control the level of activity, and the negligence rule would control the level of care). But uncertainties and imperfections in the negligence determination lead to findings of negligence, so parties who cause harm bear positive expected liability under the negligence rule. Hence, the problem of excessive payments would exist under that rule even though it would not be as significant as under strict liability. The problem of excessive payments under a tax and liability regime seemingly could be alleviated by reducing the amount of the tax to below the expected harm and by letting expected liability take up the slack in payments, but attention would have to be paid to how such a policy is implemented.