The Pigou Club in nutshel via Greg Mankiw, from Tim Kane at Kaufman Foundation:

And when the time comes to balance the budget, we should aim to tax the bad things (noise, gasoline, trash, violent crime, evil foreign dictators) and untax the good things (homegrown profits, employment, innovation).

My rejection in a nutshell: The knowledge of which things are good or bad, in which circumstances of time and place, and to what dollar amount, are beyond the reach of anyone including policymakers; but even absent the knowledge problem, the incentive problem ensures that the enacted policies would be diverted by compromise from what little we do happen to know of the public interest.

In short, Hayek and Buchanan trump Pigou. I know, I know. I'm a total party pooper. But hey. If you don't want to take my word for it, here's Coase (Sec. VI, "The Problem of Social Cost"):

[T]here is no reason to suppose that the...regulations made by a fallible administration subject to political pressures and operating without any competitive check, will necessarily always be those which increase the efficiency with which the economic system operates... [I]t follows that direct governmental regulation will not necessarily give better results than leaving the problem to be solved by the market or the firm. ... Pigou seems to have had a faulty view of the facts of the situation. But it also seems likely that he was mistaken in his economic analysis.