Sin taxes a burden on consumers

This means that it is levied in addition to the sales tax. Since this price will not compensate them for the now higher costs of doing business, some firms will have to reduce the supply of the goods in question.

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An uneducated population is therefore more susceptible to bearing the burden because they are more easily replaced by machines able to do unskilled work, and because they have less knowledge of how to make money on their own.

It is only by altering the supply or the demand that they are able to modify the price.

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How it is the outcome is fixed and how it results in this sort of tax incidence. Essay UK - http: Since supply is elastic, consumer will therefore bear most of the elasticity Mohr, ; note that irrespective of how you look at it, consumers of tobacco products will always bare the sin tax burden.

When asked whether we want these things, we ought always to ask ourselves: Where the tax incidence falls depends in the short run on the price elasticity of demand and price elasticity of supply. Suppliers supply a certain quantity according to the costs incurred and form that supply elasticity can be studied Jian, The demand elasticity of a product can be used to see how the tax will be shared when the tax is charged on consumers or paid by suppliers, thus it is necessary to explore the concept of price elasticity.

It is only by altering the supply or the demand that they are able to modify the price. All the economist can do is to point out these costs. This shows that there are limits to what people in our day are willing to accept.

The purpose of this revenue is to finance government spending. Jianwww. Many will wonder whether such paternalistic activity on the part of the government is warranted.

Applications such as studying the elasticity of demand and supply, which is basically looking at the responsiveness of consumers due to price change, is vital in the study of tax incidence and will be used through out as the sin tax burden on tobacco products is discussed.

Essay UK - http: Due to the fact that the supplier will supply the quantity demanded, if it where to fall then the supplier would supply less than the potential amount thus loose a certain amount in the process. If demand is more inelastic than supply, consumers bear most of the tax burden.

It is, therefore, not surprising that the government should eagerly tax these particular articles.

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Is the sin tax burden of tobacco products equally shared between consumers and suppliers. On the other hand, if the apple farmer is unable to raise prices because the product is price inelastic, the farmer has to bear the burden of the tax or face decreased revenues: We have come a long way from the days when it was accepted that the sole purpose of government was to protect the rights that were enumerated in the Declaration of Independence.

In this case a tax incidence can be noted that the tax is not shared equally as the consumer pays 1. Will not many of those who want to raise the revenue want people to commit the sin of using the product?. Elasticity and tax incidence Typically, the incidence, or burden, of a tax falls both on the consumers and producers of the taxed good.

Tax incidence

But if we want to predict which group will bear most of the burden, all we need to do is examine the elasticity of demand and supply. Soda taxes, and their kindred “sin taxes,” such as cigarette and gasoline taxes, are a little different than other sales taxes.

'Sin Tax' Costs Outweigh Benefits. Lobbying against sin taxes is socially wasteful, and the burden of the taxes falls most heavily on the poor. Increasing sin taxes on alcohol is bad for consumers and state budgets.

Increasing sin taxes on alcohol is bad for consumers and state budgets. increasing the tax burden on those who can least. If the consumers had been willing to pay the original price plus the tax, the producers could successfully have charged that amount in the absence of the tax.

This would show that they had been charging less than the traffic would bear. Sin taxes a burden on consumers With sin taxes constantly rising consumers must wonder who is paying for the tax that is levied on the good or service.

Elasticity and tax revenue

For some goods and services the tax is shared but tax on other goods and services, depending on the elasticity of the demand or supply, are sometimes completely paid by the consumer or producer.

Sin taxes a burden on consumers
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Tax burden of sin taxes on tobacco products - Free Economics Essay - Essay UK