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I'd argue it's a bit of both -- it's a sin tax, and a pigovian tax. Sin taxes _are_ meant to cut down on use, while pigovian taxes aren't meant to cut down on u
by laken 7y ago
I'd argue it's a bit of both -- it's a sin tax, and a pigovian tax. Sin taxes _are_ meant to cut down on use, while pigovian taxes aren't meant to cut down on use, rather, make up for external damage (such as to the environment).
https://en.wikipedia.org/wiki/Pigovian_tax https://en.wikipedia.org/wiki/Pigovian_tax
- benj111 7y agoSin taxes are pigovian taxes? And if you're contending they're different I assume one is supposed to cut down use.
- laken 7y agoAh yep, I had a typo there. Sin taxes are meant to cut down use indeed, unlike the pigovian ones.
- benj111 7y agoI have a problem with that definition, pigovian taxes are obviously going to cut down use. So the choice of label seems to be a political one.
- laken 7y agoI suppose a better definition would be that sin taxes are meant to cut down on personal use, while pigovian are meant to offset external factors which the use of the product/service causes. Of course, each of these taxes are going to end up cutting down use, as it would lower demand due to a higher cost, but the idea is that a pigovian tax is successful even if the use doesn't go down significantly, as the tax proceeds would be reinvested in offsets from the negative activity. A sin tax could do this, but it doesn't always do this.
- bryanlarsen 7y ago"as the tax proceeds would be reinvested in offsets from the negative activity." Both Pigouvian & sin taxes usually go into general revenue and are rarely targeted.
- benj111 7y ago"but the idea is that a pigovian tax is successful even if the use doesn't go down significantly" That's why I said its political. If you're pro $TAX you say its pigovian and even if it doesn't 'work' you can claim its not supposed to. Whereas if you're anti $TAX, or want to appear tough on X, you say its a sin tax. I suppose you could argue a pigovian tax would have an upper bound, whereas a sin tax isnt bounded by anything, but for the types of things either label is used for, the externalities are so far removed and open to interpretation that you could still argue whether $TAX more than offsets/comes nowhere near offsetting X. Long story short, I don't think you could say definitively whether a tax is sin or pigovian.