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Taxing Consumption and Other Sins

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Author Info
James R. Hines Jr.

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Abstract

Throughout American history, the U.S. federal and state governments have imposed excise taxes on commodities such as alcohol and tobacco (and more recently, gasoline and firearms). Rates of such "sin" taxation, and consumption taxation broadly (including sales taxes and value-added taxes), are currently much lower in the United States than they are in Europe, Japan, and other affluent parts of the world. In part, this reflects relative government sizes, but that is not the whole story, since even controlling for total tax collections, levels of national income, government decentralization, and openness to international trade, the United States imposes unusually low excise and consumption taxes. As a result, the United States relies to a much greater degree than other countries on personal and corporate income taxes, thereby affording fewer opportunities to use the tax system to protect individuals and the environment by discouraging the consumption of "sinful" commodities, and instead simply discouraging saving and investment.

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Paper provided by National Bureau of Economic Research, Inc in its series NBER Working Papers with number 12730.

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Date of creation: Dec 2006
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Handle: RePEc:nbr:nberwo:12730

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Find related papers by JEL classification:
H20 - Public Economics - - Taxation, Subsidies, and Revenue - - - General
H23 - Public Economics - - Taxation, Subsidies, and Revenue - - - Externalities; Redistributive Effects; Environmental Taxes and Subsidies
H71 - Public Economics - - State and Local Government; Intergovernmental Relations - - - State and Local Taxation, Subsidies, and Revenue

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  1. Poterba, James M, 1989. "Lifetime Incidence and the Distributional Burden of Excise Taxes," American Economic Review, American Economic Association, vol. 79(2), pages 325-30, May. [Downloadable!] (restricted)
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  2. Jonathan Gruber & Daniel M. Hungerman, 2005. "Faith-Based Charity and Crowd Out during the Great Depression," NBER Working Papers 11332, National Bureau of Economic Research, Inc. [Downloadable!] (restricted)
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  3. Atkinson, A. B. & Stiglitz, J. E., 1976. "The design of tax structure: Direct versus indirect taxation," Journal of Public Economics, Elsevier, vol. 6(1-2), pages 55-75. [Downloadable!] (restricted)
  4. Gilbert E. Metcalf, 2006. "Value-Added Tax," Discussion Papers Series, Department of Economics, Tufts University 0608, Department of Economics, Tufts University. [Downloadable!]
  5. James M. Poterba, 1991. "Is the Gasoline Tax Regressive?," NBER Working Papers 3578, National Bureau of Economic Research, Inc. [Downloadable!] (restricted)
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  6. Louis Kaplow, 2006. "Optimal Control of Externalities in the Presence of Income Taxation," NBER Working Papers 12339, National Bureau of Economic Research, Inc. [Downloadable!] (restricted)
  7. O'Donoghue, Ted & Rabin, Matthew, 2006. "Optimal sin taxes," Journal of Public Economics, Elsevier, vol. 90(10-11), pages 1825-1849, November. [Downloadable!] (restricted)
  8. Jonathan Gruber & Sendhil Mullainathan, 2002. "Do Cigarette Taxes Make Smokers Happier?," NBER Working Papers 8872, National Bureau of Economic Research, Inc. [Downloadable!] (restricted)
  9. Don Fullerton, 1996. "Why Have Separate Environmental Taxes?," NBER Working Papers 5380, National Bureau of Economic Research, Inc. [Downloadable!] (restricted)
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  10. Metcalf, Gilbert E, 1995. "Value-Added Taxation: A Tax Whose Time Has Come?," Journal of Economic Perspectives, American Economic Association, vol. 9(1), pages 121-40, Winter. [Downloadable!] (restricted)
  11. Auerbach, Alan J. & Hines, James Jr., 2002. "Taxation and economic efficiency," Handbook of Public Economics, in: A. J. Auerbach & M. Feldstein (ed.), Handbook of Public Economics, edition 1, volume 3, chapter 21, pages 1347-1421 Elsevier. [Downloadable!] (restricted)
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  12. Jonathan H. Gruber & Sendhil Mullainathan, 2005. "Do Cigarette Taxes Make Smokers Happier," The B.E. Journal of Economic Analysis & Policy, Berkeley Electronic Press, vol. 0(1). [Downloadable!]
  13. Kenkel, Donald S, 1996. "New Estimates of the Optimal Tax on Alcohol," Economic Inquiry, Oxford University Press, vol. 34(2), pages 296-319, April.
  14. Pogue, Thomas F & Sgontz, Larry G, 1989. "Taxing to Control Social Costs: The Case of Alcohol," American Economic Review, American Economic Association, vol. 79(1), pages 235-43, March. [Downloadable!] (restricted)
  15. Barthold, Thomas A, 1994. "Issues in the Design of Environmental Excise Taxes," Journal of Economic Perspectives, American Economic Association, vol. 8(1), pages 133-51, Winter. [Downloadable!] (restricted)
  16. Parry, Ian & Small, Kenneth, 2002. "Does Britain or the United States Have the Right Gasoline Tax?," Discussion Papers dp-02-12-, Resources For the Future. [Downloadable!]
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