EconPapers    
Economics at your fingertips  
 

Regressive Sin Taxes, with an Application to the Optimal Soda Tax

Hunt Allcott, Benjamin Lockwood and Dmitry Taubinsky

The Quarterly Journal of Economics, 2019, vol. 134, issue 3, 1557-1626

Abstract: A common objection to “sin taxes”—corrective taxes on goods that are thought to be overconsumed, such as cigarettes, alcohol, and sugary drinks—is that they often fall disproportionately on low-income consumers. This paper studies the interaction between corrective and redistributive motives in a general optimal taxation framework and delivers empirically implementable formulas for sufficient statistics for the optimal commodity tax. The optimal sin tax is increasing in the price elasticity of demand, increasing in the degree to which lower-income consumers are more biased or more elastic to the tax, decreasing in the extent to which consumption is concentrated among the poor, and decreasing in income effects, because income effects imply that commodity taxes create labor supply distortions. Contrary to common intuitions, stronger preferences for redistribution can increase the optimal sin tax, if lower-income consumers are more responsive to taxes or are more biased. As an application, we estimate the optimal nationwide tax on sugar-sweetened beverages, using Nielsen Homescan data and a specially designed survey measuring nutrition knowledge and self-control. Holding federal income tax rates constant, our estimates imply an optimal federal sugar-sweetened beverage tax of 1 to 2.1 cents per ounce, although optimal city-level taxes could be as much as 60% lower due to cross-border shopping.

Date: 2019
References: Add references at CitEc
Citations: View citations in EconPapers (127)

Downloads: (external link)
http://hdl.handle.net/10.1093/qje/qjz017 (application/pdf)
Access to full text is restricted to subscribers.

Related works:
Working Paper: Regressive Sin Taxes, With an Application to the Optimal Soda Tax (2019) Downloads
This item may be available elsewhere in EconPapers: Search for items with the same title.

Export reference: BibTeX RIS (EndNote, ProCite, RefMan) HTML/Text

Persistent link: https://EconPapers.repec.org/RePEc:oup:qjecon:v:134:y:2019:i:3:p:1557-1626.

Ordering information: This journal article can be ordered from
https://academic.oup.com/journals

Access Statistics for this article

The Quarterly Journal of Economics is currently edited by Robert J. Barro, Lawrence F. Katz, Nathan Nunn, Andrei Shleifer and Stefanie Stantcheva

More articles in The Quarterly Journal of Economics from President and Fellows of Harvard College
Bibliographic data for series maintained by Oxford University Press ().

 
Page updated 2025-03-19
Handle: RePEc:oup:qjecon:v:134:y:2019:i:3:p:1557-1626.