Do ‘Sin Taxes’ Really Change Consumer Behavior?


These days the Government is taxing products that are perceived to be risky for the consumers – cigarettes, soda, fried food etc. Today’s needull is an economist’s point of view on whether these taxes work. If they do work than what is the optimal value of the sin tax?

On the other hand, from an economist’s perspective, it’s not enough for something to have negative consequences to justify taxing it. Things like rock climbing have negative health consequences, potentially. Driving a car has lots of negative health consequences. The key question from an economic policy perspective is whether people are taking into account these negative effects when they’re making their consumption decisions. In particular, a reason for concern about sugary beverages is that often the negative health consequences come a long time after the date of consumption. You get diabetes or heart disease much later in life.

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