Sheena Iyengar of Slate writes that sin taxes don’t work because people don’t like to be told what not to do:
Most scientific evidence suggests that an increase in price does lead to a decrease in consumption. For soda, it’s estimated that a 10 percent markup would reduce intake by about 8 percent (PDF). (Assuming that a 12-pack of soda costs $5, a penny-per-ounce tax would raise its price by $1.44, or about 29 percent.) However, much of the research looks at the impact of higher price without taking into account that consumer response may vary depending on the reasons given for the markup.
When the markup is presented specifically as a way to modify behavior, it is likely to elicit reactance and therefore be less effective. In the real world, people’s desire to assert their freedom to drink soda may very well trump the disincentive of higher cost.
I got news for you Sheena, this is the best of all possible worlds for the taxing authorities. They get to wrap a middle-class tax hike in a public health package and still increase revenues.
A backlash of increased soda sales merely means more tax revenue for cash-strapped governments. That, and only that, is what sin taxes are designed to do.
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