Sin Tax

In the 1990’s, Bill Clinton introduced the concept of a “sin tax”. The goal of a “sin tax” is to change the behavior of people through the taxation system. It works under the property of elasticity – the greater the amount of the tax increase on a product, the fewer that product will be bought and consumed. Bill Clinton proposed increasing the tax on a pack of cigarettes to the point that the price would become so high, that it would dissuade people from smoking. He also claimed that the extra taxes raised would be used to pay for his government run healthcare plan which ended up failing along with this “sin tax”.

President Barack Obama immediately re-introduced the “sin tax” into the federal government after taking office. In February 2009, Obama signed the Children’s Health Insurance Program Reauthorization Act into law, which raised the federal tax rate for cigarettes from $0.39 per pack to $1.01 per pack. He claimed the increase taxes would help pay for the cost of the increased coverage under the State Children’s Health Insurance Program (SCHIP).

The Democrat-run Congress, that year, also proposed increasing taxes on soda, as a way to reduce obesity, and on alcohol, to reduce both the negative effects of alcohol consumption. Their sin taxes were not only targeting “sins” that were unhealthy, they also proposed a Stock Transaction Tax, to dissuade stock speculation, and also a Vehicle Mileage Tax, to reduce the amount of fossil fuels burned by automobiles.