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

Alcohol

In chemistry, an alcohol is an organic compound in which the hydroxy functional group is bound to a carbon atom. In particular, this carbon center should be saturated, having single bonds to three other atoms....

 and tobacco

Tobacco

Tobacco is an agricultural product processed from the leaves of plants in the genus Nicotiana. It can be consumed, used as a pesticide and, in the form of nicotine tartrate, used in some medicines...

, but also include candies, soft drinks, fat foods and coffee, while services range from prostitution to gambling.

Summary

Sumptuary taxes are ostensibly used for reducing transactions involving something that the society considers undesirable, and is thus a kind of sumptuary law

Sumptuary law

Sumptuary laws are laws that attempt to regulate habits of consumption. Black's Law Dictionary defines them as "Laws made for the purpose of restraining luxury or extravagance, particularly against inordinate expenditures in the matter of apparel, food, furniture, etc." Traditionally, they were...

. Sin tax is used for taxes on activities that are considered socially undesirable. Common targets of sumptuary taxes are alcohol and tobacco, gambling, and vehicles emitting excessive pollutants. Sumptuary tax on sugar and soft drinks

Soda tax

A soda tax or soft drink tax is a tax or surcharge on soft drinks. It may focus on sugar-sweetened beverages ....

 has also been suggested. 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, 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.

Opposition to sin tax

• Sin taxes have historically triggered rampant smuggling
  Smuggling
  Smuggling is the clandestine transportation of goods or persons, such as out of a building, into a prison, or across an international border, in violation of applicable laws or other regulations.There are various motivations to smuggle...
  
   and black markets, especially when they create large price differences in neighboring jurisdictions.

• Critics of sin tax argue that it is a regressive tax
  Regressive tax
  A regressive tax is a tax imposed in such a manner that the tax rate decreases as the amount subject to taxation increases. "Regressive" describes a distribution effect on income or expenditure, referring to the way the rate progresses from high to low, where the average tax rate exceeds the...
  
   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
  Value added tax
  A value added tax or value-added tax is a form of consumption tax. From the perspective of the buyer, it is a tax on the purchase price. From that of the seller, it is a tax only on the "value added" to a product, material or service, from an accounting point of view, by this stage of its...
  
   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.

• 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

• Some argue tobacco and alcohol consumption or the behaviors associated with consumption or both are immoral, or "sinful", hence the label "sin tax". By raising the cost for certain products (here called immoral), they aim to force change upon people's behavior.

• Tobacco and alcohol consumption has been linked to a variety of medical problems. In the United States alone, over 440,000 people die annually from smoking tobacco. By making the cost of unhealthy behavior prohibitive, they hope to produce a healthier society.

• 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.

Adam Smith

Adam Smith

Adam Smith was a Scottish social philosopher and a pioneer of political economy. One of the key figures of the Scottish Enlightenment, Smith is the author of The Theory of Moral Sentiments and An Inquiry into the Nature and Causes of the Wealth of Nations...

 supported the medical and moral arguments in The Wealth of Nations: “It has for some time been the policy of Great Britain to discourage the consumption of spirituous liquors, on account of their supposed tendency to ruin the health and corrupt the morals of the common people.” The moral, medical and financial arguments are occasionally considered in contemporary news settings.

Counter-arguments

• Some reject that alcohol and tobacco consumers financially burden societies. 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.

See also

• Consumption tax
  Consumption tax
  A consumption tax is a tax on spending on goods and services. The tax base of such a tax is the money spent on consumption. Consumption taxes are usually indirect, such as a sales tax or a value added tax...
  
  
• Excise
  Excise
  Excise tax in the United States is a indirect tax on listed items. Excise taxes can be and are made by federal, state and local governments and are far from uniform throughout the United States...
  
  
• Fair tax
• Green tax shift
• Pigovian tax
  Pigovian tax
  A Pigovian tax is a tax levied on a market activity that generates negative externalities. The tax is intended to correct the market outcome. In the presence of negative externalities, the social cost of a market activity is not covered by the private cost of the activity...