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Admit it, progressive sin taxes clobber the poor far more than the rich

In these strange days, when communism is hip and printing money is seen as wealth creation, no economic fact is so basic that it can be taken for granted.

Take regressive taxation, for example. It is a simple concept with a straightforward definition. If a tax takes a greater share of income from the poor than from the rich, it is regressive. If it takes a greater share from the rich, it is progressive.

Whatever you think of “sin taxes” on things like alcohol, sugary drinks and tobacco, they are indisputably regressive.

Read more: DEBATE: Is a new digital tax a good idea to rescue the high street?

But not according to an editorial in the Lancet earlier this year.

In an effort to promote more sin taxes, particularly on food and soft drinks, the medical journal suggested that such taxes benefit the poor and are progressive.

This statement was made despite a study in the same issue concluding that people on low incomes “bear the largest tobacco tax burden consistently across all countries”, and that the burden of alcohol taxes on low-income households is “proportionately larger than the burden borne by high-income households”.

The findings corroborate all the empirical literature which suggests that people on low incomes who consume these products tend to bear the largest financial burden. So where does the idea that these taxes are progressive come from?

The “public health” lobby argues that poor people are more responsive to price rises, and therefore enjoy greater health benefits.

The billionaire nanny statist Michael Bloomberg made this point bluntly in a recent interview. According to him, “Some people say taxes are regressive, but in this case – yes, they are. Thats the good thing about them. Because the problem is in people that dont have a lot of money, so higher taxes should have a bigger impact on their behaviour and how they deal with themselves.”

And yet, the empirical literature does not support this theory either.

Aside from the awkward fact that sugary drinks taxes have never reduced obesity anywhere, their limited impact on the consumption of these drinks tends to be weaker among low-income groups.

These groups also tend to suffer higher rates of alcohol-related harm, despite drinking less alcohol, and have much higher rates of smoking, despite decades of rising tobacco taxation.

Whichever way you look at them, these taxes clobber the poor.

Public health campaigners dont want to admit this, even to themselves, because they see themselves as champions of social justice.

The cost to the average British family of the recently implemented sugar levy will be relatively trivial, but it would rise to £500 a year if the government introduced the kind of taxes that Bloomberg wants to see on food and drink.

Taxes on alcohol and tobacco already cost UK consumers £24bn a year. Yes, governments need to get money from somewhere, and not every part of the tax system can be progressive. But campaigners for more sin taxes should admit that it is the poor who suffer more than the rich.

Read more: The sugar tax is an ineffectual way to price the externalities of obesity

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