A sin tax may be considered a type of sales tax, but it more specifically falls under the classification of sumptuary taxes. It is imposed on goods which are considered harmful, whether morally or physically.
Sin taxes are commonly levied on alcohol, gambling, and tobacco. In certain territories, sin taxes are also imposed on substances such as marijuana. Sin tax revenue may be used for specific projects, especially those directed toward the improvement of citizens’ well-being. However, it is also not unusual for this to be directed to the overall national budget.
While sin taxes may seem to be useful in “hitting two birds with one stone,” the imposition of these also has its drawbacks. Critics claim that additional tobacco taxes do not serve as a deterrent for smokers, and neither do taxes for alcohol stop alcoholics. Addiction to such substances is of a physiological nature and can be better addressed with other methods.
Also, it is argued that sin taxes are not really imposed to improve citizens’ quality of life. It may be viewed as just another way to line the country’s coffers, as it seems to be a shrewd way of taking advantage of people’s personal choices and preferences.
Sin tax is also considered a form of regressive tax, which means that poorer people are penalized more that rich people in the process of its implementation. In many cases, people from the lower classes appear to be bigger consumers of the products for which sin taxes are imposed.