What is a Sin Tax?

What is a Sin Tax?

Sin Tax cartoon

I generally have a problem with most so called sin taxes.  I think my main problem with sin taxes have to do with politicians purporting them to be anything other than a way to raise money.

What are Sin Taxes?

Sin taxes can be defined as

A state-sponsored tax that is added to products or services that are seen as vices, such as alcohol, tobacco and gambling. These type of taxes are levied by governments to discourage individuals from partaking in such activities without making the use of the products illegal. These taxes also provide a source of government revenue.

Pros and Cons of Sin Taxes

The pros are pretty easy to understand:

  • The whole ‘sin’ part! Meaning that if the government taxes (and thus people reduce their amount of activity) an immoral act then society can become more moral
  • Often the activities they are taxing (tobacco and alcohol) lead to increased medical costs and this is a way to try and move society towards a healthier position.
  • Similarly, those costs are often born by government sponsored health care, so this is a way to collect on those costs early on.

Likewise, the cons are also easy to understand:

  • Sin taxes are regressive in that the amount paid is always the same (i.e. New York’s Increase in Cigarette Tax is an absolute number, ~$5.00/pack) so those with lower incomes are affected more
  • Sin taxes could cause a black market situation or rebellion
  • Some argue that Sin taxes don’t work
  • Lastly, who the hell is in charge to determine what is moral or immoral (answer: legislature, but is that a good answer?)

Like any mix of tax and society there is no easy answer.  While I disagree with charging a sin tax on soda, but would be ok with legalized prostitution with a high sin tax.  Thoughts?

21 Responses to What is a Sin Tax?

  1. “Sin” taxes do nothing but make the poor poorer. Cigarette taxes are an excellent example. When I was down in the dumps, I worried more about how I was going to buy more cigarettes than I did about how I was going to buy any food.

    When the RYO tobacco tax went up an astounding $25/lb, I was extremely agitated, as were many, many, many other people. Now, I find it hilarious that I can get around that ridiculous price jump (which made the taxes cost more than the product itself) by using pipe tobacco. Still a nice $12/lb, though that really sucks for the people who stockpiled tobacco before the tax went in to effect. I remember watching people carrying cases out of the tobacco shop. They were smart at the time, but I bet they’re pissed now.

    • “I worried more about how I was going to buy more cigarettes than I did about how I was going to buy any food.”

      Woah buddy don’t you think it is time to quit then?

      • That’s crazy talk. Being in a situation like that, cigarettes were about the only thing getting me through the day.

  2. while i understand why government institutes these taxes i also dont think that anyone should be making moral choices for others. If a free man in america wants to gamble, he should be able to without paying the government a tax. the same goes for alcohol, tobacco, and whatever else the government considers immoral!

  3. The problem with sin taxes is that they are so subjective. What is a sin to one person might not be so for someone else. For example I have no problem with cigarette taxes because I don’t smoke. But I don’t want to see soft drinks taxed because I do enjoy those. And I know it’s not the healhiest thing in the world, but is soda really a sin??

    Where do you draw the line? And who gets to decide what is sinful? It’s a dangerous road to go down.

  4. Intersting topic. From a moral standpoint, I think it’s just an attempt at a bandaid fix, if it even works.

    If they want America to stop certain behavior, they’ve got to understand the root cause that makes it appealing in the first place. Not that I have the answers, but if they can get them to change at the heart level, then behaviorial change would follow.

    Taxing these activities might just make them rebel and figure out ways to do it even more.

    • But whose morals? Like SMT said above, where is the line drawn. I could care less if prostitution was legal and taxed to high heaven (pun intended LOL).

      “Taxing these activities might just make them rebel and figure out ways to do it even more”

      I just read an article today, that said the price of marijauana is going to PLUMMET if it is made legal in Cali

      • Not quite sure who’s creating the moral standards for these “sin” taxes. Maybe someone has a picture of ideal American values.

        I do think it may go too far though. More taxes on soda? That just seems outrageous to me, even though I don’t drink it.

        Regarding week, if the price plummets, maybe the increased taxes will make up for it? Not sure about that one.

    • I am not talking trash about the Bill of Rights. I am questioning whether a type of economic tax is appropriate and useful. Additionally, a lot of these measures are being done on the State level currently, so wouldn’t I just have to move to a different state? I guess if I cared that much about an extra couple cents on soda (which I don’t drink by the way, but do collect) I could head elsewhere.

      Thanks for input lol

  5. Sin taxes are just another money grab for the incompetent politicians running municipalities and our states/federal govt so they can spend more money because they don’t understand fiscal restraint. It’s all about the next election and pissing away money and saying how much you’ve done for “the people” gets you elected, not doing what Chris Christie’s doing now in Jersey. He’s making tough choices and there are probably a few thousand union thugs who would like to take a baseball bat to him.

    We’ve seen it over and over, tax something new, piss it away and everyone forgets about the last hike when a new one is enacted. Since these taxes are on relatively unpopular items like tanning in Obama’s bill or cigarettes which are primarily consumed by the poor, the pols don’t lose any points with voters. But I know what they’re doing. There’s nothing beneficial or moral about their attempt to tax sin – the motive is solely another money-grab.

  6. It’s not really a “moral choice for others.” It’s a financial choice. For everyone. The sickness that tobacco causes–and alcohol, too, which also causes injury and property damage–is paid for by all of us, in the form of higher insurance premiums and taxes to pay for indigent healthcare.

    Nicotine is more addictive than heroin. Once a person is hooked (for many people, this takes only a few cigarettes), it’s extremely difficult to get off it. Witness Jake’s remark that he was more worried about how to buy cigarettes than about how to buy food. He’s not kidding. Talk to anyone who’s trying to kick this drug, and you’ll learn that withdrawal is physically painful; talk to those who have been off it for years, and you’ll learn that the craving for tobacco never fully goes away.

    I wish my mother could have made the “moral choice” to get off the tobacco. She might have lived to see her grandson.

    It’s not a moral choice. For many people there’s no choice at all — either for the addicts or for the rest of us who have to underwrite the consequences of their addiction.

    • FAM,

      Sorry to hear about your mother. I just had a buddy who is pregnant lose her mother to cancer very tough time for them.

      While you don’t see sin taxes as a moral choice for others there are those that proclaim them to be such. Ignoring that argument just for a second, I can kind of see the point about raising costs for society, BUT I have to agree with Darwin,

      “We’ve seen it over and over, tax something new, piss it away and everyone forgets about the last hike when a new one is enacted. ”

      New York just enacted a cig hike, bringing up a pack to Lord knows what (doesn’t really affect me), but do you REALLY think the extra couple hundred million brought in is to pay for the soon to be sick? No shot it is being used TODAY or rather YESTERDAY to pay for budget gaps because no one can stop spending.

  7. I think in theory the idea of a ‘sin’ tax is a good one. It’s certainly easy for a politician to sell. But like you said, who is to say what counts as a ‘sin’? I feel like this is somewhat similar to what they did in New York City when they made trans fat illegal. This is clearly better for the public’s health and for that reason I think it was a good move, but I think it steps over the boundaries of personal choice a bit.

  8. While I don’t smoke, drink (more than a beer here and there), or gamble, I’m still not a fan of a “sin” tax. I’m just not a big fan of the government telling me what is right for me to consume and what is wrong for me to consume.
    I just don’t think we can adequately know what is “next” when they start taxing this stuff…
    Thought provoking blog.

  9. Personally, I have a bigger problem with the “stupid tax” aka the lottery.

    Aren’t most sin taxes approved by the voters? I guess if the majority of the people think something is moral or immoral that’s better than politicians deciding for us. I personally don’t have a problem with these taxes (I don’t smoke or drink other than an occasional beer), but agree they are a bit arbitrary.

    Perhaps if the government is worried about kids getting fat, they should put an age limit on soda rather than taxing it?

  10. Evan,
    Intriguing topic and great discussion. I think that using “government” and “morality” in the same sentence is an oxymoron. Our politicians overspend and then justify higher taxes to fund their own inadequacies by calling them “sin” taxes. Ever hear of the pot calling the kettle black?

  11. I am not opposed to it, however I usually don’t partake in any of the “sinful” taxes. I don’t eat fast food, I dont smoke, hardly drink, and only gable on vacation. However, who am I to decide what is considered “sinful” – The same question you guys have been talking about. It’s a never ending debate you could have.

  12. People are going to sin anyway, so why not let them contribute to society while they do it by paying a little tax?

Leave a reply


+ 5 = 11