The Death of the Pigovian Tax: Comment

Abstract

In a recent paper in this journal, “The Death of the Pigovian Tax? Policy Implications from the Double-Dividend Debate,” Eban Goodstein examines the theoretical results and policy implications of the environmental “tax-interaction” literature of the past decade. Although his call for continued assessments of this literature is commendable, Goodstein’s paper includes some misinterpretations and inaccuracies. This comment indicates that, contrary to Goodstein’s claims, the tax-interaction literature is consistent with prior theory and supports the use of environmental taxes. In addition, this comment aims to clarify the implications of tax interactions for optimal environmental taxation, the “double dividend,” and related issues.