SYMBOLISM.

The rarity of Pigovian taxes could also be based in part upon the negative expressive and symbolic nature of such measures. Taxes have long had a negative connotation in American politics, even when they are not being imposed directly upon individuals.162 When the Obama administration began to pursue legislation to reduce greenhouse gas emissions, it rejected Pigovian taxes as politically unpalatable, precisely (and entirely) because of the word “tax” in the name.163 President Clinton encountered stiff resistance to a much more modest energy tax several years earlier.164 This was despite the fact that, as economists have shown, a properly structured Pigovian tax and a properly structured cap-and-trade system will function almost identically.165 Then, when Obama eventually proposed a cap-and-trade system, opponents attacked it as “cap and tax,”166 seeking to tar it with the same brush. The word “tax” is toxic, particularly for political conservatives.167

At the same time, Pigovian taxes have a bad reputation among many political liberals, particularly when compared with the alternative of direct regulation. Part of the opposition relates to the fact that Pigovian taxes allow a company to continue polluting so long as it is willing to pay the appropriate price. If pollution is a moral wrong, in that the polluter is imposing harm upon an unconnected victim, then it strikes some commentators as immoral to permit a firm to continue to pollute on the condition that it pays a fee.168 This objection evokes concerns of compensatory or distributive justice: if a polluter pays a Pigovian tax in order to harm some victim, the tax payment may go to the general fisc rather than the victim herself. Of course, this concern ignores the fact that an ideally designed Pigovian tax would reduce pollution and harm to the same level as an ideal system of command-and-control regulation.

Relatedly, there is a powerful resistance within both academia and public opinion to the idea of putting a price on human life or health.169 That opposition is typically voiced with reference to cost-benefit analysis, 170 but Pigovian taxes trigger the same considerations with equal force. A Pigovian tax requires the regulator to price the externality being created and then allow the regulated entity to continue producing that externality if it pays the requisite price. Human lives are being converted into dollars even more directly. From this standpoint, command-and-control regulation appears superior because (at least ostensibly) it entirely prohibits the disfavored activity.

We have criticized these approaches to monetization and regulation in other work,171 but the normative issues are not the central point. The negative symbolism of using a tax to control pollution or other harms can have powerful political effects, particularly when the tax is viewed negatively on both sides of the political spectrum. It is tempting to believe that efficiency will win out in the long run—that if Pigovian taxes really are superior to command-and-control regulation, policymakers will eventually enact them as the various constituencies come to recognize their advantages. On this view, costs and benefits will eventually triumph.172 We suspect (and hope) that the negative connotations attached to Pigovian taxes will eventually disappear as norms and attitudes shift. There are certainly precedents for this type of change, such liberals’ eventual adoption of market-based regulation of the environment (cap-and-trade legislation dealing with acid rain) and health care (the Affordable Care Act).