Sin taxes are one of the more controversial taxes out there. They are basically a form of indirect taxation (which has its pros and cons) on goods and services which society considers to be moral ills.
As a general rule, it is unwise for the government to interfere in people's lives more than is necessary to enforce the rights of others. Libertarians rightly ask why we should punish people for making decisions about their own lives — even if the majority says we should, that doesn't make it right.
Sin taxes, though they rarely have conventional economics cited as a defence of them, actually do have sound economic backing however. In fact, a libertarian should support sin taxes, because they correct an infringement of individual rights.
Common examples of sin taxes are taxes on cigarettes and alcohol. Choosing to consume these goods is an individual decision; should the government be involved and actively attempt to reduce their consumption?
The answer is yes, because of the external costs not accounted for in the price of these goods. Without taxes, the price of a pack of cigarettes would not account for second-hand smoke and the impact of cigarette smoking on the health and enjoyment of others.
Likewise, the price of alcohol does not include the costs of things like drunk driving and other general impairment of one's faculties which can pose a menace to society. It is the individual who is harmed by a drunkard who cannot react quickly enough to avoid an accident.
A logical conclusion might be to even extend the sin tax to other things. Libertarians in a number of countries have been campaigning for the legalisation of drugs because they believe that the choice to use drugs is an individual one which the government has no right to interfere in.
I personally am not inclined to take a strong stand on this issue, but if I were to side with the libertarians (which is my natural inclination), I would nevertheless also support a steep sin tax on drugs. Cocaine and marijuana have similar effects on society as cigarettes and drugs (some research indicates that marijuana smoke may be more dangerous than cigarette smoke). It only makes sense to tax their consumption to internalise their external costs.
There is a time and place for everything under the sun, and that includes government intrusion on individual decisions. When your decision has an impact on others, the price of that decision must account for the potential costs and benefits it will bring about.
health officials grappling with the obesity epidemic have debated a wide range of approaches to helping slim the American waistline. To some degree, everything from building more sidewalks to banning chocolate milk has been explored. Yet few tactics have been as polarizing as the possibility of introducing tariffs on treats. Despite endorsement from several respected obesity researchers and politicians, soda taxes, for example, have been subject to severe scrutiny, as critics protested that implementing a tax before verifying that it would achieve the end result was shortsighted and potentially overreaching. So, in attempt to determine just how sin taxes might impact people's food choices, psychologists from the University of Buffalo decided to put junk food levies to the test—in the lab.
Researchers recruited shoppers to peruse the aisles of a mock supermarket filled with 68 common foods labeled with nutritional information. Participants were given a predetermined amount of cash, and were told to use that money to purchase a week's worth of groceries for a family. The first time, all of the products on the shelves were priced in keeping with local supermarkets. In subsequent trips, however, junk food was taxed—an additional 12.5%, then 25%— or healthier foods were subsidized to reduce cost.
The study, published in the journal Psychological Science revealed that taxes were more effective at getting people to avoid certain products than subsidies...
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