Taxing Sin to Modify Behavior and Raise Revenue

By: Jonathan Gruber, PhD, Professor of Economics, Massachusetts Institute of Technology

Sin taxes on tobacco and alcohol have a long history in the U.S., and many credit cigarette taxes as being the single most effective strategy in achieving our dramatic reductions in smoking. Similar taxes have been proposed in recent years as one weapon in our fight against rising obesity rates, and a new study has just added support for this policy by showing that higher prices for sweetened sodas are associated with lower caloric intake, lower weight, and better health. In this essay, Dr. Gruber reviews the rationales for and experience with sin taxes for cigarettes and alcoholic beverages, and offers his insights on using sin taxes to combat obesity.