Tax and Fiscal Policy

Sin taxes increase inequality and disproportionately harm the poor

Tax is the single biggest area of expenditure for low-income groups and indirect taxes in particular are a major cause of Britain’s cost of living crisis. Despite significantly lower rates of alcohol consumption and car ownership, households in the lowest income quintile spend twice as much on ‘sin taxes’ and VAT as the highest quintile as a proportion of their income.

This new video from ieaTV explains why cutting such taxes would deliver substantial economic benefits:

9 thoughts on “Sin taxes increase inequality and disproportionately harm the poor”

  1. Posted 26/09/2014 at 08:45 | Permalink

    You seem to have substantially misunderstood the point of taxes on alcohol and tobacco. These taxes are about public and individual health. Tobacco taxes are to reduce tobacco consumption, because smoking kills and destroy addicts health; (you can see it on the packets – its not a secret any more). Tax on alcohol is to discourage consumption as societies in which there is too much alcohol have terrible social problems.

    Your argument that it would drive economic growth seems to imply that that is the only objective of government – it isn’t. Public health is a legitimate object of public policy.

    Do you not think that you should declare the fact that you receive money from tobacco companies, which could influence your views?

  2. Posted 26/09/2014 at 11:12 | Permalink

    I don’t recieve money from tobacco or alcohol companies and to my shame for 60 years my addiction to nicotine ensured that those companies and each succesive government continuously recieved increasing amounts of money from me. You have a valid point about the health risks to smokers and drinkers of alcohol but I suspect protecting the public’s health is not the main motive behind such heavy taxes otherwise such a caring protective government would courageously ban these addictive products regardless of public outcry and commercial pressure.

  3. Posted 26/09/2014 at 20:36 | Permalink

    @ anonymous The reason that tobacco has not been banned is simply the tobacco lobby is too strong and has too many politicians in its pocket. There is no safe level of nicotine consumption, and I think there are few if any who are able to be occasional nicotine takers. Alcohol on the other hand does have a safe level and is indeed beneficial (especially for older people) at low levels. I think there is a genuine concern about these products from some parts of the political establishment – but you can see that it is also economic. When tobacco was giving huge revenues and limited costs (in the 1950s and 60s) there was little pressure to anything about the health risk. As the cost to the NHS have increased as the average smoker had been smoking 30 + years, then the government took an interest in controls.

    I am sorry to hear about your addiction to nicotine – in your defence for most of your life – advertising pushed the idea that if not exactly healthy it was associated with success and rugged individualism. However now there is an alternative – E-cigarettes – you can get your nicotine without all the cancer causing agents. Good luck and good health.

  4. Posted 28/09/2014 at 14:46 | Permalink

    Thank you Hugo for those kind thoughts. Even during what I laughingly called ‘My Prime’, and even whilst nonchalantly smoking untipped Woodbines for so many years, I never achieved the rugged individualism of, (and I fear this may date me) for example: The film stars George Raft or James Cagney even though at the time I secretly longed and failed to emulate their screened toughness. Obviously E-cigarettes are less harmfull and contain less poisons than does tobacco smoke, but nicotine vapour is inhaled into the lungs ofone and all, and also leads to longterm nicotine addiction and longterm expenditature. It is the nicotine addiction as well as the smoking ritual that is so difficult to escape from. There is no easy way to give up the habit, even via the very expensive anti-smoking aids on the market. In the end will-power and the determined intention is the only escape.

  5. Posted 29/09/2014 at 03:29 | Permalink

    Surprising to see that there is still people who believe, that sin taxes are about health. Of course not. Just because politicians say so, it does not become truthful. Sin taxes are taxes like the video says. The nonsense about health is just the political argument.

  6. Posted 29/09/2014 at 16:14 | Permalink

    “These taxes are about public and individual health.”

    No they’re not.

  7. Posted 29/09/2014 at 16:43 | Permalink

    The anti-tobacco pressure does not come from politicians – it came / comes from doctors. The same goes for alcohol – driven by doctors. But I guess that you are probably working for a PR company for the tobacco or alcohol industry. What is very curious is as Hugo points out – that the Institute of Economic Affairs receives money from the tobacco industry – is it any wonder they come out and support their benefactors?

  8. Posted 30/09/2014 at 16:40 | Permalink

    Once hooked it makes no difference what you pay for something – obviously people are spending almost all their disposable income on this stuff which means theyre probably not eating properly, that’s just as much a cause of disease, because the impact is on the immune system and bodies fighting capability. If people are hooked’ they ought to be getting support to get off it, rather than being taxed through the teeth instead.

  9. Posted 30/09/2014 at 18:41 | Permalink

    @Michael Davis: The anti-tobacco pressure comes from the global pharmaceutical industry who is lobbying and campaigning to have a world-wide nicotine monopoly. But of course you are still right: It is doctors who are spreading the anti-tobacco campaign (and anti E-cig campaign) in the media. They do that on behalf of the pharma industry, often with huge grants and payments tied from the industry.
    The pharma industry is not an industry like any other industry. A new book, written by the world-wide respected Danish doctor & professor of The Cochrane Center, Peter Gøtzsche claims, that the global pharma industry is higly corrupt, that is has millions of doctors on their payroll, and that its business model is organized crime.

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