Regressiveness of Differentiated Excise Taxation

Seungjin Han and Josip Lesica

Canadian Public Policy, 2025, vol. 51, issue 1, 77-93

Abstract: In Ontario, as in other parts of Canada, beer is subject to a lower excise tax rate if it is from a microbrewery. We examine the welfare impact of this policy and estimate how much more regressive it is than a uniform beer tax. We use unique point-of-sale data on retail beer prices and sales from 2010 to 2015, matched with household data around each store's location. As expected, the micro beer share increases with household income. Our estimates suggest that the effective tax rate for a household with a $50,000 income is $0.20 per litre higher than for a household with a $250,000 income, whereas the excise taxes on micro and non-micro beer are about $0.20 and $0.70 per litre, respectively.

Keywords: differentiated excise taxation; income regressiveness of taxation; alcohol; beer (search for similar items in EconPapers)
Date: 2025
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