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A sin tax is a kind of sumptuary tax: a tax specifically levied on certain generally socially proscribed goods, usually alcohol and tobacco.



Sumptuary taxes are ostensibly used for reducing transactions involving something that the society considers unwanted, and is thus a kind of sumptuary law. Sin tax is used for taxes on activities that are considered socially proscribed. Common targets of sumptuary taxes are alcohol and tobacco, gambling, and vehicles emitting excessive pollutants. Sumptuary tax on sugar and soft drinks has also been suggested [1]. Some jurisdictions have also levied taxes on illegal drugs such as cocaine and marijuana.

The revenue generated by sin taxes is sometimes used for special projects, but might also be used in the ordinary budget. American cities and counties have used them to pay for stadiums, in Sweden the tax for gambling is used for helping people with gambling problems. Acceptance of sumptuary taxes may be greater than income tax or sales tax.

Opposition to sin tax

  • Sin taxes have historically triggered rampant smuggling and black markets, especially when they create large price differences in neighboring jurisdictions.
  • Critics of sin tax argue that it is a regressive tax in nature and discriminates against the lower classes, since in many jurisdictions they are more likely to be consumers of alcohol and tobacco and more likely to consume a greater quantity of it.
  • Sin taxes are not normally value added in nature meaning that expensive, high-quality product more likely to be purchased by the wealthy will have the tax comprise a much smaller proportion of its final purchase price, thus ensuring that the lower classes pay a much greater proportion of their lower income in tax.
  • Critics also argue that the behavior affected by sin taxes are strictly personal and of no social consequence, and therefore should not be moderated by government.

Support for sin tax

  • In countries like Britain or Canada with government funded healthcare, politicians rely on the argument that consumers of tobacco and alcohol cause a greater financial burden on society and should be taxed extra to pay for these costs. However, one study used a mathematical model to compare estimated health costs of obese persons, tobacco smokers, and "healthy-living people". Until age 56, obese persons had the highest estimated annual health expenditure. Tobacco smokers older than this had the highest estimated health costs of all groups, but since life expectancy is shorter for smokers, the "lifetime health expenditure was highest among healthy-living people." The model for this study used input parameters based on data from the Netherlands. [2]

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Simple English

A sin tax is when the government taxes things that are considered to be bad for society.

For example, if the government increases taxes on alcohol and cigarettes to make them so expensive, that less people will use them.

Arthur Pigou was a famous economist who supported the sin tax.


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