It is possible this is because he has structured his taxes incorrectly—they aren’t properly taxing damages, but rather an intermediary which can cause damages.
I think your complaint is missing his main argument, which is that the taxes are more difficult to structure correctly than it would first appear. To quote the last paragraph:
But the problem of externalities applies to a wide range of different situations, in many of which it is far from obvious which party can avoid the problem at lower cost and in some of which it is not even obvious which one we should call the victim.
I think your complaint is missing his main argument, which is that the taxes are more difficult to structure correctly than it would first appear. To quote the last paragraph: