The problem with Pigovian Taxes, as they are currently implemented, as that the tax revenues currently collected under this principle are not allocated toward fixing the detriments to society, health, or the environment which warrant their existence. The taxes currently leveraged on nicotine products here in the US for instance, go to pay for health insurance for the children of underprivileged parents. (1) This being the case, a close ratio between the costs imposed on society by the product and the tax thereon cannot be guaranteed without a special inquiry every so often or by interested parties, which is not case, for there would, in all likelihood, be a steady decrease in the tax as manufacturing of the preventative and curative measures is streamlined.

This does not mean that the principle of Pigovian Taxation is flawed in any way, except in implementation.

1. Nicotine Tax: A False Economy?, The Economist, April 1st, 2009, http://www.economist.com/blogs/freeexchange/2009/04/nicotine_tax_a_false_economy

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