Working Paper: NBER ID: w29393
Authors: Christopher Conlon; Nirupama L. Rao; Yinan Wang
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 68% of sin taxes, 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.
Keywords: sin taxes; corrective taxes; household clusters; tax burdens
JEL Codes: H22; H23; H25; L66
Edges that are evidenced by causal inference methods are in orange, and the rest are in light blue.
| Cause | Effect |
|---|---|
| purchasing behavior (D12) | tax burden (H22) |
| household demographics (R20) | tax burdens (H22) |
| sin good purchases (M31) | tax burdens (H22) |
| high consumption of one sin good (E21) | higher taxes on others (H29) |
| taxes on sugary beverages (H71) | burdens of heavily taxed households (H31) |
| cigarette taxes (H71) | affect lower-income households (H31) |
| taxes on wine and spirits (H29) | affect households (D10) |