The Problem With Pigouvian Taxes

A post on the Tax Policy Blog hilights what I believe to be the biggest drawback to Pigouvian taxes:

UCLA Law Professor Eugene Volokh explains why California's proposed 25% tax on pornography is likely unconstitutional:

Content-based taxes on the sale of First-Amendment-protected materials (and recall that the law targets not just unprotected and illegal obscenity, but also constitutionally protected pornography) are generally forbidden[....]

Even putting aside the legal problems, we've previously discussed why such taxes are poor tax policy...

Using taxes as a tool of social engineering is poor policy because it complicates the tax code and increases the amount of rent seeking...

A number of criticisms of the Pigou Club and carbon taxes have been given in the blogosphere and I find all but one utterly unconvincing. Such as:

Argument 1: There's no way of knowing optimal carbon tax rate is.

Answer: Does anyone ever ask what the optimal corporate income tax rate or optimal sales tax rate is? Of course not. Why should emission taxes be held to a different level of scrutiny? All that matters is that the carbon tax is more efficient than whatever tax is reduced (or whatever tax would have been raised had the carbon tax not been raised). What matters isn't efficiency, as measured in a vaccum. What matters is efficiency in an opportunity cost sense. And there is no evidence I have seen that a targeted sales tax (which a carbon tax essentially is) is less economically efficient than any form of income tax (personal or corporate).

Argument 2: Governments won't reduce other taxes. This is just a tax grab and governments will spend the money.

This is just a classic 'balanced budget' fallacy - that the government simply spends all the money it takes in. No more, no less. So if taxes are raised, spending will just be raised in tandem. Doesn't the last 7+ years show us the fallacy of such thinking? There is simply no evidence that fiscal policy works in this manner. All the evidence we have suggests the opposite - that government spending goes down when tax rates go up and vice-versa.

But one argument I do buy... the argument that allowing 'Pigovian'-esque thinking will lead to all kinds of crazy targeted sales taxes on whatever the government of the day finds inappropriate. The pesky second amendment thwarting your gun control efforts? Just tax the things and watch above-the-counter sales plummet! Don't like bottled water? A 2-dollar-a-bottle tax should put an end to that! (This is more than a hypothetical example - something like it has been tried). Too many Chinese migrants coming to your country? Tax 'em! Etc. etc.

This is something I am quite concerned about. And I don't see a way around it. Of course, this could still be freedom-improving if governments used Pigovian-esque logic to end prohibition and instead legalize and tax marijuana.