How much should firearms be taxed?

[DanTex]

Most people agree that, since firearms ownership has a negative externality in the form of gun violence, it should be taxed, similar to fuel that pollutes the environment. One question is how high the tax should be.

Economically speaking, the tax should equal the marginal cost on society. So if each additional gun sold results in $100 dollars of damage to society, then the tax should be $100 per gun.

A few years ago, some social scientists did a study that tried to compute the marginal cost of gun ownership, and their estimates were in the range of $100 to $1800 annually for each gun-owning household. Part of the reason for the wide range is that the estimate depends on the statistical value of human life. Basically, the study found that, on average, the number of homicides in a county increases by between 1 and 3 for every additional 10,000 gun owning households. They used a range of between $1 and $6 million for the social loss associated with each additional homicide to arrive at the total.

This paper provides new estimates of the effect of household gun prevalence on homicide rates,
and infers the marginal external cost of handgun ownership. The estimates utilize a superior proxy
for gun prevalence, the percentage of suicides committed with a gun, which we validate. Using
county- and state-level panels for 20 years, we estimate the elasticity of homicide with respect to gun
prevalence as between +0.1 and + 0.3. All of the effect of gun prevalence is on gun homicide rates.
Under certain reasonable assumptions, the average annual marginal social cost of household gun
ownership is in the range $100 to $1800.

http://home.uchicago.edu/~ludwigj/papers/JPubE_guns_2006FINAL.pdf