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?