Regressiveness and sin taxes

Posted by Christie Malry on February 15, 2012 at 10:12 am

A line at the bottom of an article on the regressiveness (or not) of the personal allowance gets me wondering: why does the rhetoric of regressiveness/progressiveness fly out of the window when government talks about sin taxes?

Regressiveness is a four letter word when it comes to taxation. A tax is said to be regressive if its cost, as a proportion of income, falls more heavily on those with lower incomes than those with higher incomes. Conversely, a tax which according to that definition falls more heavily on the rich is said to be progressive.

You can also apply these definitions to benefits, and even to policies which change how benefits will be allocated. Progressive policies good, regressive policies bad.

So what are we to make of today's rumours of a crackdown on alcoholism? Government is proposing, yet again, to hike duties on alcohol to make it more expensive. Because a higher price ought to mean lower consumption. Won't increased duties fall more heavily on the poor, thereby falling foul of our creed of progressiveness?

OK. There are some problems with assessing the progressiveness of taxes which are consumption-based (such as alcohol and tobacco duties), rather than income-based. I showed that in the context of VAT here. But, given the central role that the issue has taken in policy-making and political debate, shouldn't the government at least be addressing the point?

If it concludes that it can set progressiveness aside in this area, why allow it such prominence in discussion of other policies?

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