I’m probably past my Ezra-quota for the day, but this post on taxing fizzy drink/ soft drink/ pop/ soda (trying to cater for my WHOLE audience there) was really interesting.

It raises questions about changing our tax system so that, rather than discouraging good behavious through taxation, such as through a payroll tax, perhaps we ought to gain a larger proportion of taxable income from putting higher taxes on behaviours we wish to discourage.  Or, more objectively, to tax in such a manner that it prices for negative externalities.

Take the fizzy drink example:  pop causes tooth decay.  It causes people to gain weight.  These are two costs that, in one way or another, our society has to pay.  So why not make the pop drinkers pay directly through a tax on pop.  It’s not discriminatory: it simply ensures the product reflects the ACTUAL costs.  In short, it is pricing for negative externalities.

I have traces of libertarian in me.  I believe behaviours that do not harm others should be legal, providing the cost to the individual accurately represents the cost to society.

The same goes for carbon tax.  At the moment, the price of fuel and electricity and, well, everything, really, doesn’t reflect its true cost to society.  As the world heats up, costs are going to be incurred.  How, exactly, are we going to pay for them?  I honestly believe that they should tax petrol and electricity production until it accurately represents the ultimate cost to society.  And perhaps that will change the market in such a way that greener options become more financially appealing.

Yes, things will get more expensive.  But, one way or another, these are costs that we are going to have to bare.

To my mind, our taxation structure should definitely change so that goods that are good for society (like fruits and vegetables) have a low cost, while good that are bad for the world, in terms of health, environment, or other costable negative externalities, should accurately reflect those costs.