Sin tax

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.

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.

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