Taxing things which damage the environment is a good way to make individual firms and families take account of the wider consequences of their actions. By taxing leaded petrol more heavily than unleaded petrol, we are forcing drivers who use the leaded variety to pay for the extra discomfort they are causing others.
Government also uses taxation to promote particular values. Very high tobacco taxation is supposed to discourage smoking. Some politicians even argue that the tax and benefit system promotes lone parenthood by giving lone mothers extra money.
But a word of caution: it is easy to exaggerate the power of tax. General social and economic trends are often much more powerful than the tax system. In the end, the reason the Treasury taxes "undesirable" activities is to raise money without raising too many complaints.
Here, Paul Johnson and Sarah Tanner from the Institute for Fiscal Studies investigate government arm-twisting by taxation; and we offer some reminders of past more-or-less batty attempts to change us via the pennies in our pockets.Reuse content