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

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 com- prise 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: Excise tax, sin tax, tax burden

JEL Classification: L66, H22, H23, H25