Summary of “Sin” Taxes – e.g., on Tobacco – Are Less Efficient than They Look

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“Sin” Taxes – e.g., on Tobacco – Are Less Efficient than They Look summary
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Tobacco, alcohol and sugar are bad for people’s health. Excessive consumption creates direct and indirect costs for taxpayers. So policy makers in the United States and Europe consider taxing harmful substances to offset these costs and nudge people toward making healthier choices. This article from The Economist compares various studies on the effects of these taxes and shows that what may sound straightforward in theory is more complicated in practice. Both sin-tax advocates and skeptics will appreciate this balanced, evidence-supported analysis.   

In this summary, you will learn

  • Why some governments impose “sin” taxes to promote public health, 
  • Why measuring the effectiveness of such levies is difficult and
  • Why smokers save taxpayers money.
 

About the Author

The Economist is a UK-based weekly magazine covering economics and politics. 

 

Summary

The idea of levying taxes on substances a society considers harmful seems like a no-brainer. By imposing a tax on alcohol, tobacco and sugar, governments can earn extra revenue while promoting public health. Evidence suggests that so-called sin taxes succeed at curbing consumption. Studies have found that alcohol and tobacco sales drop by 0.5% for every 1% increase in price. Meanwhile, sales of sugary drinks declined by almost 10% in Mexico and the city of Berkeley, California, after their respective governments started taxing these beverages, while sales of bottled water increased.


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