They’re known as “sin taxes,” and a new study shows that taxing alcohol, sugar, and tobacco is just a way for the government to make more money from low-income people.
It’s always made logical sense, since those with low-incomes tend to spend a disproportionate amount of their money on junk food, alcohol and tobacco than the wealthy. When governments introduce “soda taxes” as some benevolent way to force people to make better choices, it’s really about more tax money.
Oh, but it’s just pennies, supporters of such taxes say (a Google search found these taxes described as a “penny-per-ounce tax”). Well if it’s just pennies, how will it actually deter people from buying?
The answer is that it’s really not a determent tax, it’s a way to get taxes from people who pay less in income taxes, and a new study from the Institute of Economic Affairs proves it.
The conservative think tank found that these taxes “cost poor families up to ten times more than they cost the wealthy,” calling the tax “regressive.” As to the claim that such taxes lead to health benefits, especially for low-income people, IEA found:
Decades of high taxes on tobacco and alcohol in many different countries suggest that this is not true. Despite very high rates of duty, smoking is much more common among low-income groups in Britain and whilst alcohol consumption is lower among these groups, rates of alcohol-related harm are considerably higher.
Further, the think tank’s research found that sugar taxes aren’t providing health benefits, either.
“Low-income consumers do not seem to have particularly elastic demand for sugary drinks,” the study found. “Even if they enjoyed disproportionate health gains from sin taxes, they would still suffer a net loss to their welfare and the tax would remain regressive in the traditional sense.”
Naturally, the think tank concludes that the government can’t fund itself just by taxing the rich, and that’s where these taxes help.