Nothing is certain except death and taxes. And nothing could be worse, except perhaps death by taxes.
And there is no tax more related to its grim counterpart than the sin tax.
We’ve already heard much weeping and gnashing of teeth over the provincial government’s plan to run Alberta’s highest deficit ever, while taking on debt to pay for capital investments, and also raising corporate and certain income tax rates.
One tax you’re not likely to hear much outcry about is the sin tax. Although taxes are universally hated, the sin tax on alcohol and tobacco is one that rarely receives much public criticism.
A recent Mainstreet poll assessing Albertans’ views of the provincial budget showed that while 52 per cent said the government should not raise taxes to balance the budget, a healthy 59 per cent approved of the increased taxes on liquor and cigarettes.
The idea behind the sin tax is to penalize the perceived sins of drinkers and smokers and discourage people from partaking in the vices all while bringing in the government some extra coin.
There is evidence that increasing the cost of tobacco and alcohol has real and tangible effects on rates of consumption. According to an April 2015 report by Alberta Health Services, tobacco consumption dropped from 5.39 million cigarette equivalents to 3.95 million equivalents following the introduction of a $2.25 per package tax increase in 2002.
It’s important to note that the higher prices have proven to not only motivate smokers to quit, but they also discourage youth from starting. Increasing the cost of tobacco by 10 per cent effects youth rates of tobacco demand at four times the rate of adults.
But the sin tax also comes with its downfalls, particularly related to the effect of rising alcohol prices on society’s vulnerable and poor.
A 1999 report by the National Institute on Alcohol Abuse and Alcoholism says that while light drinkers were discouraged by higher liquor prices, heavy drinkers were largely unresponsive to price increases. The sin tax is not an antidote to addressing addiction, and in some cases can actually exacerbate the problem.
Alcohol taxes also affect low-income earners disproportionately. Medium to high-income earners tend to spend more on alcohol in general due to having more disposable income. As a result, they pay more in sin taxes. However, the alcohol tax consumes a higher proportion of income in low-income houses, which can sometimes make the difference between paying the bills or falling deeper into debt.
In terms of how the hikes will effect the consumer, expect a roughly 60 cent increase on cigarette packs, while wine and spirits and a case of beer will both go up by about two dimes, give or take a few cents. In closing, I believe it’s important for the government to regulate alcohol and tobacco (and perhaps marijuana as well soon) closely. But there’s no use in pretending the sin tax will in a puff of smoke solve all that ails society.
And I’ll raise a glass of ale to that.