IEA - Lancet findings ignore the regressive impact of sin taxes
Sin taxes hit the poorest the hardest
Responding to claims in the Lancet that taxes on sugary drinks, tobacco and alcohol are not regressive (4 April), Christoper Snowdon of the Institute of Economic Affairs said:
“The harm done to people on low incomes by sin taxes cannot be shrugged off. Regressive taxation has a strict definition in economics. It means taking a greater share of income from the poor than from the rich. It is indisputable that alcohol and tobacco taxes have had that effect in Britain and the sugar tax will do the same when it begins on Friday.
“The claim that poor people disproportionately benefit from these taxes is absurd. Sugar taxes have not reduced obesity rates anywhere in the world and smoking is much more prevalent among the poor than among the rich, despite decades of high taxes on tobacco. There is precious little evidence that poor people benefit from being taxed. On the contrary, sin taxes drive them further into poverty.”
Notes to Editors:
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- In 2015/16, indirect taxes took 34% of disposable income from people in the poorest decile but only 14% from people in the richest decile.
- In 2015/16, people in the poorest decile spent 2.9% of disposable income on tobacco duty (£276). Those in the richest decile spent 0.1% (£109).
- In 2015/16, people in the poorest decile spent 2.0% of disposable income on alcohol duty (£196). Those in the richest decile spent 0.9% (£671).
(Source: Income, tax and benefit data by income decile for all households, ONS.)
The mission of the Institute of Economic Affairs is to improve understanding of the fundamental institutions of a free society by analysing and expounding the role of markets in solving economic and social problems and seeks to provide analysis in order to improve the public understanding of economics.
The IEA is a registered educational charity and independent of all political parties.
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