Sin tax

Not to be confused with syntax.

Taxation
An aspect of fiscal policy
Policies Government revenue Tax revenue Non-tax revenue Tax law Tax bracket Tax threshold Exemption Credit Deduction Tax shift Tax cut Tax holiday Tax advantage Tax incentive Tax reform Tax harmonization Tax competition Double taxation Representation Unions Medical savings account Tax, tariff and trade
Economics Price effect Excess burden Tax incidence Laffer curve Optimal tax Theory Optimal capital income taxation
Collection Revenue service Revenue stamp Tax assessment Taxable income Tax lien Tax refund Tax shield Tax residence Tax preparation Tax investigation Tax shelter Private tax collection Tax farming
Noncompliance Tax avoidance Tax evasion Tax resistance Tax haven Smuggling Black market Transfer mispricing Unreported employment Tax shelter
Distribution Tax rate Progressive Regressive Proportional
Types Direct Indirect Per unit Ad valorem In rem Capital gains Carbon Consumption Dividend Ecotax Excise Fuel Georgist Gift Gross receipts Income Inheritance (estate) Land value Payroll Pigovian Property Sales Sin Single Stamp Steering Turnover Value-added (VAT) Corporate profit Excess profits Windfall profits Negative (income) Flat Wealth
International Financial transaction tax Currency transaction tax Tobin tax Spahn tax Tax equalization Tax treaty Permanent establishment Transfer pricing European Union FTT
Trade Custom Duty Tariff Import Export Tariff war Free trade Free trade zone Trade agreement
Religious Church tax Eight per thousand Teind Tithe Fiscus Judaicus Leibzoll Temple tax Tolerance tax Jizya Kharaj Khums Nisab Zakat
By country List of countries by tax rates Tax revenues as %GDP Albania Algeria Argentina Australia Azerbaijan Bangladesh Bhutan Bulgaria Canada China Colombia France Germany Greece Iceland India Indonesia Iran Ireland Israel Italy Japan Kazakhstan Lithuania Malta Namibia Netherlands New Zealand Norway Pakistan Palestinian territories Peru Philippines Poland Russia Singapore South Africa Sweden Switzerland Tanzania United Kingdom United States Uruguay

A sin tax is an excise tax specifically levied on certain goods deemed harmful to society, for example alcohol and tobacco, candies, drugs, soft drinks, fast foods, coffee, sugar, and gambling. Two claimed purposes are usually used to argue for such taxes. In contrast to Pigovian taxes, which are to pay for the damage to society caused by these goods, sin taxes are used to increase the price in an effort to reduce their use, or failing that, to increase and find new sources of revenue. Increasing a sin tax is often more popular than increasing other taxes. However, these taxes have been criticized for burdening the poor and being part of a nanny state.

Summary

Sumptuary taxes are believed by supporters to be important in reducing transactions involving something that society considers undesirable, and is thus a kind of sumptuary law. Sin tax is used for taxes on activities that are considered socially undesirable. In many cases, sumptuary taxes are implemented to mitigate use of alcohol and tobacco, gambling, and vehicles emitting excessive pollutants. Sumptuary tax on sugar and soft drinks has also been suggested; see soda tax. Some jurisdictions have also levied taxes on recreational drugs such as marijuana.

Revenue generated by sin taxes supports many projects imperative in accomplishing social and economic goals. American cities and counties have utilized funds from sin taxes to expand infrastructure, while 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.

Support

• Proponents argue that the consumption of tobacco and alcohol, the behaviors associated with consumption, or both consumption and the behaviors of consumption, are immoral or "sinful", hence the label "sin tax". For example, Mayo Clinic anesthesiologists Dr. Michael Joyner and Dr. David Warner support increasing taxes on tobacco and alcohol, with the goal of using tax codes to help change behavior and improve health.
• Tobacco and alcohol consumption has been linked to a variety of medical problems. In the United States alone, over 440,000 annual deaths are considered to be related to smoking tobacco. By raising the cost of unhealthy behavior, for some, it may discourage or prohibit said behavior.
• Following the medical argument, some argue that consumers of tobacco and alcohol cause a greater financial burden on society by forcing others to pay for medical treatment of conditions stemming from such consumption, especially in most first-world countries with government-funded healthcare, and should be taxed extra to pay for the costs of their treatment.
• The moral, medical and financial arguments are occasionally considered in contemporary news settings.

Opposition

• 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 taxation of a product such as alcohol or cigarettes does not account for ability to pay, therefore poor people pay a greater amount of their income as tax.
• Sin taxes are not normally value added in nature meaning that expensive, high-quality products 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.
• Sin taxes fail to affect consumers' behaviors in the way that tax proponents suggest, for instance increasing smokers' propensity to smoke high-tar, high-nicotine cigarettes when the per-pack price is raised and increasing the rate of people mixing their own drinks rather than buying pre-mix alcoholic spirits.
• 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.
• Not all research supports the idea that alcohol and tobacco consumers financially burden societies through health expenditures. 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 and the obese, the "lifetime health expenditure was highest among healthy-living people." The model for this study used input parameters based on data from the Netherlands.
• The government may become reliant on the revenue from the tax and have to encourage "sinful" behavior in order to maintain the revenue stream.

See also

• Consumption tax
• Ecotax
• Land value tax
• Müskirat resmi
• Paternalism
• Pigovian tax
• Taxation and regulation of alcohol production
• Tobacco tax