Got a problem? You need a tax

Got an economic or social problem that needs fixing? Don’t worry. There’s a tax that can do the job.

Take climate change. Across parts of Canada — Ontario, Alberta, British Columbia — the big news is the imposition of carbon taxes. The theory is simple enough, so simple that Ontario Premier Kathleen Wynne can dash it off in a couple of sentences. "People don’t want to pay more and I get that,” she said in December. But the carbon tax will take pollution out of the air. “Climate change is the single biggest threat that we’re facing as the human race.”

Alberta deputy premier Sarah Hoffman says the province’s new carbon tax is “the best way for us to protect for the environment and protect jobs and get pipelines built.”

So there you have it: Environment, jobs, and pipelines, all wrapped up and taken care of with a new carbon tax.

Same is true with traffic congestion. There’s a tax for that. In Toronto, Mayor John Tory attempted to bring in a $2 road toll for two main expressways. The claim is that this will reduce the number of cars on the expressways, thereby reducing congestion and pollution — and provide bonus cash to spend on public transit. The province agreed with the principle, but killed the plan for political reasons. Or maybe the province realized that if you put a tax on one road, motorists will change habits and cause congestion on other routes.

Bill Gates, the Microsoft billionaire, recently proposed a tax on robots. The objective of the robot tax (rejected the other day by the EU Parliament) is to slow down their rate of introduction and use the money to help displaced workers retrain and find new jobs.

In economics, such taxes — on carbon, roads, tobacco, robots, etc. — are said to be necessary to reduce “externalities.” That’s economist jargon for the negative effects of human activity not taken into account in the market price of a product, or if the product or service is not priced at all. A now dead British economist named Arthur C. Pigou invented the idea of using taxes to offset externalities, which is why they are now called Pigouvian taxes. All we need to do is calculate the “social cost” of the externality, a hilariously complicated impossibility that keeps bureaucrats and consultants very busy.