Who Pays Sin Taxes? Understanding the Overlapping Burdens of Corrective Taxes

Christopher Conlon, Nirupama Rao and Yinan Wang
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Christopher Conlon: NYU Stern School of Business and NBER
Nirupama Rao: University of Michigan Ross School of Business
Yinan Wang: NYU Stern School of Business

The Review of Economics and Statistics, 2024, vol. 106, issue 6, 1719-1729

Abstract: We find that sin-good purchases are highly concentrated, with 10% of households paying more than 80% of taxes on alcohol and cigarettes. Total sin-tax burdens are poorly explained by demographics (including income) but are well explained by eight household clusters defined by purchasing patterns. The two most taxed clusters comprise 8% of households, pay 63% of sin taxes, and are older, less educated, and lower income. Taxes on sugary beverages broaden the tax base but add to the burdens of heavily taxed households. Efforts to increase sin taxes should consider the heavy burdens borne by few households.

Date: 2024
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