Ben Lockwood, University of Pennsylvania, Wharton School
Regressive Sin Taxes, with an Application to the Optimal Soda Tax.
Abstract
common objection to "sin taxes" - corrective taxes on goods that are thought to be overconsumed, such as cigarettes, alcohol, and sugary drinks|is that they often fall disproportionately on low-income consumers. This paper studies the interaction between corrective and re-distributive motives in a general optimal taxation framework, and delivers empirically implementable sucient statistics formulas for determining the optimal commodity tax. The optimal sin tax is increasing in the price elasticity of demand, increasing in the degree to which lowerincome consumers are more biased or more elastic to the tax, decreasing in the extent to which consumption is concentrated among the poor, and decreasing in income e ects, because income e ects imply that commodity taxes create labor supply distortions. Contrary to common intuitions, stronger preferences for redistribution can increase the optimal sin tax, if lower-income consumers are more responsive to taxes or are more biased. As an application, we estimate the optimal nationwide tax on sugar-sweetened beverages, using Nielsen Homescan data and a specially designed survey measuring nutrition knowledge and self-control. Our estimates imply that current city-level taxes in Berkeley and elsewhere are somewhat lower than the social optimum.
Ben Lockwood is an assistant professor of Business Economics and Public Policy at the University of Pennsylvania’s Wharton School. His research specializes in public economics, with a focus on issues of taxation and inequality. He has studies the use of taxes both for redistribution and as an instrument to change behavior. Recent work explores the use of work subsidies such as the Earned income Tax Credit to accomplish redistribution while encouraging work, and the growing use of soda and sweetened beverage taxes to improve health outcomes. He has also studied the use of income taxes to encouraged talented individuals to pursue professions beneficial to society.
Professor Lockwood did his graduate work at Harvard University. His research has been published in the Journal of Political economy, the Journal of Public Economics, the Journal of Monetary Economics and the Harvard Business Review.