Paul L. Caron

Wednesday, February 13, 2013

Sin Taxes: Size, Growth, and Creation of the Sindustry

Sin TaxesAdam J. Hoffer (University of Wisconsin-La Crosse, Department of Economics), William F. Shughart II (Utah State University, Hunstman School of Business) & Michael D. Thomas (Utah State University, Hunstman School of Business), Sin Taxes: Size, Growth, and Creation of the Sindustry (Mercatus Center, George Mason University):

Revenue shortfalls have undermined states’ ability to balance their budgets. Particularly attractive places for new revenue creation are taxes levied selectively on specific goods whose consumption public policy makers want to discourage, arguing that they impair the consumer’s health, generate negative externalities, or both. These selective taxes collectively are known as “sin taxes” because of their historical association with vice. This paper explores three criticisms of sin taxes. First, the taxation of selected goods as a source of general budget revenue contradicts the standard Pigouvian social welfare argument. Second, the economic burden of sin taxes falls disproportionately on low-income households. Third, the expanding number of goods being taxed in this way results in unproductive preventive and defensive lobbying by the affected industries.

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How could you miss the fact that the higher cigarette tax rates have encouraged smuggling. So some people stop smoking because of the cost and others smuggle cigs like they used to smuggle booze. It's a great solution.

Posted by: air65cav | Feb 13, 2013 1:17:59 PM

Every one of the criticisms is describing a benefit to legislators.

Posted by: Andy Freeman | Feb 15, 2013 11:45:51 AM