Sin Tax Intro

Topics: Tax, Taxation, Regressive tax Pages: 3 (1050 words) Published: January 30, 2013
I.INTRODUCTION

To raise revenue for tight government budgets, legislators sometimes attempt to raise revenue by imposing unusually high excise taxes on cigarettes, liquor, gambling, and so on. This type of charge, often called a "sin tax," appeals to voters who view it as a way of discouraging consumption of certain objectionable products. It reduces the income of the buyer.Lowers profits for the seller, and leads to reduced investment, wages, and jobs.It is not likely to seriously discourage consumption habits when those habits are intensely desired.It may eventually decrease government revenue, especially as people move their business to the informal sector.It encourages people to turn to harder substances to feed their habits at the same price.It creates underground markets, which tend toward corruption and violence, and fosters disrespect for the law.It sets up a moral hazard for policy makers, who vacillate between wanting to discourage undesirable behavior and wanting to encourage it for revenue purposes. A sin tax is a kind of sumptuary tax: a tax specifically levied on certain generally socially proscribed goods and services, for example alcohol andtobacco, candies, soft drinks, fast foods, coffee, and gambling. Sumptuary taxes are ostensibly used for reducing transactions involving something that society considers undesirable, and is thus a kind ofsumptuary law. 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 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 countries have used them to pay for stadiums, while in Sweden the tax for gambling is...
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