A recent study estimates the marginal damages (marginal external cost) for 10,000 sources of air pollution in the United States. The study reveals substantial spatial variation in the marginal damage from pollution, a result of differences in population densities around the pollution sources. For example, the marginal damage from SO2 is $220 per ton for an electricity-generating unit in rural Oregon, compared to $10,860 per ton for a generator upwind of New York City. The appropriate pollution tax equals the marginal damage from pollution, so the tax on a polluter in an urban area would be much higher than the tax on a rural polluter. One response to a system of efficient pollution taxes would be to shift pollution to less densely populated areas, where damages from pollution are much lower.