I’ve posted before about sin taxes – this notion of using tax as a means of controlling or modifying behavior.
In the UK, the Chancellor delivered the new budget this week. The budget included little in the way of new or increased taxes since the UK is in the throes of many of the same financial woes that the US is experiencing. However, the few new taxes that were introduced are noteworthy: they are pure sin taxes.
The tax increases that are getting the most press currently are boosts in the prices of alcohol. The new budget calls for a 4p addition in tax for beer; 3p addition in tax for cider; 14p addition in tax for a liter of wine and a remarkable 55p for hard liquor. The rise in tax prices was contemplated as a deterrent against binge drinking. The question is whether that makes a difference in behavior.
I’m not a binge drinker so I will say that I don’t understand the mentality. That told, I can’t imagine that an increase of 3p per beer, which works out to approximate 5¢ per drink, would sufficiently serve as a deterrent to binge drinking. Would a nickel really cure an addiction?
So let’s call a spade a spade: the increases in tax on alcoholic drinks aren’t really meant to serve as a deterrent. They are a revenue raiser – and a revenue raiser that few taxpayers would challenge.
In fact, sin taxes rarely attract attention. That’s the beauty of sin taxes. The behavior that they are meant to contain or modify is generally of a nature that is morally or ethically frowned upon. Realistically, the Budget Office understands that there will not be a huge public outcry against increasing the tax on drink. They would expect a different response to an increase in, say, sales tax.
So maybe sin taxes do work – but not in the way that you expect.
