REPEALING REGRESSIVE FEDERAL EXCISE TAXES

Federal, state and local excise taxes hurt blacks disproportionately because they require the poor to pay a higher portion of their incomes in taxes.

Excise taxes include gasoline taxes. They also include so-called “sin taxes” that are imposed ostensibly to curb consumption of unhealthy products such as alcohol, sugary beverages and tobacco.

But sin taxes are less about promoting public health than about generating government revenue.

For one thing, they aren’t very effective in reducing demand for unhealthy products. The demand for such products tends to be less sensitive to price changes than other products. This is especially true for those who are addicts.

The United Kingdom’s Adam Smith Institute noted: “Sin taxes are blunt instruments which are more likely to deter moderate users than abusers. Although the price elasticity of alcohol is -0.44, for heavy drinkers it is a more inelastic -.028. The same has been found to be true of heavy smokers and excessive eaters: the people who most need to reduce their consumption are the least responsive to price rises.”[i]

For another, revenue generated from sin taxes are typically used to fund general government programs rather than programs to promote the healthy lifestyles that they were theoretically imposed to promote. For example, just 2% of the $25.3 billion collected by the U.S. government in tobacco taxes in 2011 was used for smoking cessation programs.

The poor pay the heaviest burden of such taxes.

As a percentage of income, the bottom 10% of wage earners spend four times as much in taxes for cigarettes than the top 10%; the bottom 20% of wage earners spend nearly twice as much in alcohol taxes as the top 20%; and the bottom 20% spend seven times as much in fat taxes as the top 20%.

With most sin tax revenue going into general funds and minorities more likely to consume taxed products in general, this represents a significant wealth transfer from the poor to middle class and wealthy Americans.[ii]

Blacks deserve a better deal on taxes…

Project 21 recommends…

  • Repealing the federal gas tax.
  • Repealing alcohol taxes.
  • Repealing soda taxes.
  • Repealing taxes on fatty foods.
  • Repealing the taxes on tobacco.
  • Repealing the taxes on non-tobacco nicotine products.

[i] Christopher Snowdon, The Wages of Sin Taxes, Adam Smith Institute, London, England, 2012, available at https://www.scribd.com/document/264632766/The-Wages-of-Sin-Taxes-CJ-Snowdon-ASI-0.

[ii] “The Wages of Sin Taxes: The True Cost of Taxing Alcohol, Tobacco and Other ‘Vices,’” Adam Smith Institute, London, England, May 15, 2012, available at https://www.adamsmith.org/blog/tax-spending/the-wages-of-sin-taxes-the-true-cost-of-taxing-alcohol-tobacco-and-other-vices.