let's not get silly
Agreed that the example is silly, but the general trend is basic economics. A tax and a subsidy have the same effect on behavior in the short term, but one of them makes the industry less profitable (and thus it shrinks) whereas the other makes the industry more profitable (and thus it grows). I really don't want to make the industry of "endangering public health" more profitable.
the general trend is basic economics
Well, first of all, if there are two industries and their size is a zero-sum game (all population is divided between classes A and B and everyone must belong to either A or B) then the effect of a tax and a subsidy is exactly the same. What grows one part, shrinks the other part and vice versa.
Second, this is a general-purpose argument against helping anyone in trouble. And, certainly, sometimes it is a valid argument (e.g. see the flood insurance for shore properties in the US). But sometimes its validity is more doubtful: for example, following this logic the SSI system for disability benefits should be dismantled immediately.
A post from Gregory Cochran's and Henry Harpending's excellent blog West Hunter.
The commenter Ron Pavellas adds:
The Wasserman Test.