Chase Blount: Sin taxes do not work

Chase Blount studies at the University of Bath. He is the Chair of Torfaen Conservatives and is Chair of Libertarian Conservatives UK.

A sin tax, otherwise known as a vice goods tax, is an indirect tax on goods considered to be ‘harmful’ to society, such as alcohol, sugary foods and drinks, and tobacco. When governments set these taxes, they usually do so for a multitude of goals.

The first, and primary goal argued by the proponents of such taxes, is to deter the usage of these goods in the name of public health and welfare, while reducing negative externalities. Another argument is to raise government revenue from such goods, and the last reason is to reform industries that produce these goods by reducing their profits by affecting their demand.

This all sounds like a positive levy at first, but as you delve deeper into what really happens and how sin taxes affect people, they actually cause much more harm than good.

Many people believe, across the political landscape, that a tax on a good will decrease its consumption, since people will be less willing to purchase said good, rather than spending their money on something else or even investing it. In the case of many sin goods, however, this is not true.

Tobacco, for example, is a sin good. It’s also an example of a good where price inelasticity is low. This means that demand is affected only slightly as price rises. The reason it’s inelastic is that it’s prone to addiction, meaning no matter how much you raise that price, the consumer would rather get money from elsewhere to pay for it. They might reduce their consumption of other goods instead, or shop for lower-quality products, maybe even borrowing to make up for the extra weekly costs.

UK evidence shows that tobacco is an inelastic good because studies estimate cigarette price elasticity at only −0.35 to −0.78, meaning a 10 per cent rise in price causes demand to fall by only 3.5–7.8 per cent. Since the percentage fall in quantity demanded is smaller than the percentage rise in price, tobacco demand is price inelastic. The same could be said for alcohol, vapes, and even sugary foods.

The only fall we do see in goods which have a sin tax applied is from those who these goods weren’t really having a negative impact on to begin with. This doesn’t solve the main proprietors who are suffering from overuse.

This policy, therefore, only changes the patterns of those who do apply moderation to their overall consumption. In addition to this, it’s highly likely that a high portion of the decrease in consumption is due to people moving towards illegal markets where the sales aren’t reported.

So, significant deterrence isn’t actually achieved from sin taxes; what is achieved is the reduction in the overall purchasing power of the consumer who uses the taxed goods. The policy only serves to make people poorer rather than improve their health habits.

The government also can’t make the best decisions for every person. The paternalistic nature of the state’s argument in introducing these sin taxes completely disregards the pleasure that consumers gain from these goods. The state imposes a natural higher value on health rather than pleasure, which forces the hands of people who should be completely free to decide for themselves.

Deterrence isn’t now a valid argument to propose sin taxes, but they still increase revenue, right? Well, they do… but it’s a very small boost, especially with the administrative costs and extra bureaucratic processes, which are definitely not enough to justify the damage that they cause.

If we look at a recent UK statistic, tobacco duty has continuously increased by levels above inflation for years. In the year between 2024 and 2025, revenue decreased by 23 per cent from the year between 2021 and 2022 despite the yearly increases. You might put that down to a drop in purchases; however consumption didn’t drop by that much – it only dropped by around 3 per cent.

This is clear evidence that when we keep increasing taxes, we actually lose real-term revenue because many people decide to take their business to the black market and end up paying no taxes at all. A recent figure revealed that 45 per cent of cigarettes consumed in the UK are illicit and pay no tobacco duty, resulting in an annual loss of around £4.5 billion.

Despite somewhat of a revenue from sin taxes, they still cause so much damage to lower-class families. These taxes disproportionally affect those on lower incomes, and further exacerbate a steep class divide in Britain. Hypothetically, if a pint now costs £1 more due to tax, this is around 8 per cent of the average lower-class hourly wage, whereas it’s only around 3 per cent of the average upper-class hourly wage in the UK.

If revenue serves as the primary reason for these sin taxes, we reach a stage where the state is dependent on this revenue and addicted to it. This can be an unstable source in the scenario where society naturally moves towards healthier lifestyles if more information regarding these goods’ effects on health comes out, and if health education grows.

Lastly, let’s look at industry ‘reform’ or, as it really should be called, industry harm. When a government starts implementing or raising sin taxes, it harms the very industries and establishments that prosper from such goods.

If we take pubs, for example, when we start raising taxes on alcohol, out of those who do decide to stop drinking, or decide to buy their drinks from the black market, that’s a hefty amount of revenue that pubs lose. They’re either forced to increase their prices for pints or they have to take the hit fully themselves.

At a time when energy costs, employment costs, and regulatory burdens are so high due to state intervention, this leads to many pubs closing their doors, resulting in increased unemployment, especially amongst young people, with pub jobs usually being their first. It also leads to a plethora of issues, from social anxiety rates rocketing, with nowhere for people to socialise, people staying inside leading to higher depression rates, and a society which doesn’t know how to communicate anymore.

It’s not just pubs either; when we tax sugary foods and drinks, we negatively affect cafes, bakeries, and small hospitality shops. Sin taxes are killing small businesses.

There is one industry that benefits, however. The black market booms every time the state introduces more sin taxes or bans goods. They’re given a higher market dominance over these goods, and in cases where goods are banned, they’re given a monopoly. This can result in a lot more harm than the goods themselves do in a reported and open environment, as the quality of the black market can be dangerous to consumers with a lack of information regarding the products.

Sin taxes don’t work; they don’t positively or significantly reduce consumption of goods, they don’t raise government revenue by much, they cause negative industry reform, and they hurt those on lower incomes the most.

The only thing that they are successful in doing is boosting the cartels’ profits. It’s time that we move away from a state which nannies its people, towards one that gives people the freedom to make choices for themselves, even if it’s not pure for their health.

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