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Thread: Do taxes change consumer behaviour?

  1. #1

    Default Do taxes change consumer behaviour?

    Some say yes, some say no.


    “taxes would not change consumer behaviour.” - see below


    Tax junk food high in sugar and salt, says top doctor - BBC News
    https://www.bbc.com/news/health-46636422




    Carbon taxes do not curb emissions or help battle climate change | The Star

    “High prices have not always proved the best way of promoting energy efficiency. Significant progress has been made using other tools.

    Mandatory mileage standards for vehicles have resulted in dramatic increases in fuel efficiency, allowing North Americans to drive larger vehicles without guzzling more gas. Electricity generation has been largely de-carbonized in Canada through government fiat, while in the U.S. a shift away from coal was driven by a drop in natural gas prices, not higher taxes.”

    https://www.thestar.com/opinion/cont...te-change.html
    Last edited by KC; 02-01-2019 at 10:44 AM.

  2. #2
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    Booze and tobacco have been increasingly taxed for ever. You'd hear people complain every time, but nothing really changed. Any change that might have occurred would have been from the health aspect. From cost? Not so much.
    Last edited by howie; 02-01-2019 at 10:35 AM.
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  3. #3

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    “Carbon taxation was originally based on a right-wing, free-market theory. The simple idea, to..”. See below.


    I believe in global warming — and even I think carbon taxes are idiotic
    BY SPECIAL TO FINANCIAL POST
    ORIGINALLY PUBLISHED: MAR 8, 2018

    Let me preface by saying that I believe the greenhouse effect is real. Therefore, I am for sensible policies that reduce global emissions. Sadly, carbon taxes aren’t sensible if our goal is to reduce global emissions. They cost too much and do too little. So how did we go so wrong on carbon taxes?

    Carbon taxation was originally based on a right-wing, free-market theory. The simple idea, to paraphrase Milton Friedman, is that if you tax something, you get less of it. It could elegantly allow the markets to find the most efficient ways to reduce carbon without the need for government regulations. Many respectable conservative-minded people bought into this theory. Let’s look at the reality in practice. ...”

    https://business.financialpost.com/o...es-are-idiotic


    Do “sin taxes” work? - The Economist explains
    https://www.economist.com/the-econom...sin-taxes-work



    Jack Mintz: Sin taxes are far too valuable for cannabis to dodge the bullet – Financial Post


    “Carbon taxes are also a form of “sin” taxation to discourage GHG emissions through consumption and production.

    Governments profess that sin taxes are meant to discourage activity. If so, tax rates should be set at gouging high rates to discourage consumption, yielding as little revenue as possible. The only constraint to such high taxes is ...”


    “Nonetheless, the dirty worldwide secret is that governments mainly use sin taxes to raise revenue, not to discourage consumption. Sin taxes are easy marks since legal consumption of liquor, tobacco and gambling consumption varies little with tax rates. So governments can assess high tax rates without losing much of the tax base. And through regulation such as customs at borders and monopolistic distribution centres like the LCBO, they can protect the tax base, making it difficult to evade the tax.

    In Canada, “sin taxes” raise a lot of money for governments to spend. In 2016-17, federal and provincial alcohol revenues totalled $11.9 billion through liquor profits or excise duties and custom duties. Tobacco levies totalled $8.3 billion and gambling profits $7.5 billion. These three sin taxes add up to almost $28 billion. This whopping amount is not far from federal GST revenues of about $35 billion in 2017. “

    https://business.financialpost.com/o...dge-the-bullet
    Last edited by KC; 02-01-2019 at 11:01 AM.

  4. #4
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    Yes, they do. You didn't post a single link for your devil's advocate position that they don't. Your links complained that they're hard to implement properly or that they're politically untenable, not that they don't actually work. What credible economist argues otherwise? You can argue about the details and whether they're the best solution to a problem and things like leakage/displacement. But unquestionably, sin taxes reduce consumption of whatever is being taxed if they can't be avoided. The research on that is crystal clear.

  5. #5
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    Quote Originally Posted by Marcel Petrin View Post
    Yes, they do. You didn't post a single link for your devil's advocate position that they don't. Your links complained that they're hard to implement properly or that they're politically untenable, not that they don't actually work. What credible economist argues otherwise? You can argue about the details and whether they're the best solution to a problem and things like leakage/displacement. But unquestionably, sin taxes reduce consumption of whatever is being taxed if they can't be avoided. The research on that is crystal clear.
    while you're absolutely correct in confirming that sin taxes do change consumer behavior, i'm less convinced that they reduce consumption of whatever is being taxed than they simply reduce overall consumption with much of that taking place in areas outside of whatever is being taxed.

    i'm an ex smoker and have been for a long time but i also smoked for a long time before i quite. i lived through the price of a package of cigarettes going from about 35 cents to about $10 a pack when i quite (i think it's now close to $12 but im not sure). i bought and burned the same number of cigarettes every day regardless of the increased prices. and i went without other things in order to do that.

    can you raise the sin tax enough to overcome that? i'm not sure but i doubt it - if you look at the results of raising the sin tax to the point where you make it illegal to purchase any amount at any price, even that doesn't curtail consumption whether you're talking about cigarettes or booze or sex. i'm not even sure at what point the societal costs of the higher taxes don't outweigh the taxes raised even if those are dedicated to harm reduction when you factor in the costs of poorer diets etc.

    there's also quite a difference between the "sin tax" on gasoline and that on substances like nicotine - or even sugar - that are addictive and where there is much less "choice" in whether or not to consume or whether to consume in more moderation. this is part of the reason that sin taxes also typically become a disproportionate tax on the poor. so while you're technically correct at one level, sin taxes are really a ready source of government revenue much more than they are a positive deterrent to individual detrimental behavior (which is likely the real reason they are so attractive to government and why governments defend them so much). the actual percentage changes in use patterns of the taxed substance are demonstrably less than the percentage changes in the taxes levied.

    as for the carbon tax, i'm not sure it qualifies as being a "sin tax" in even the same manner as gas taxes, never mind nicotine or alcohol or gambling. the carbon tax isn't technically a tax on harmful activities at the personal level, they are a tax on the cumulative effect of activities at a societal level. in that sense, they are an attempt to capture the externalities of burning carbon and to make those costs a part of the pricing for that commodity.
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