Question

In: Economics

Should the government use taxes to discourage people from doing something (like smoking or importing goods...

Should the government use taxes to discourage people from doing something (like smoking or importing goods from Mexico and China)?

Solutions

Expert Solution

The government use several tax policies to discourage the consumption of cigarettes and import of the harmful goods from Mexico and China. The most important form of tax implemented for this goods are sin taxes. Sin tax imposed on goods like tobacco, alcohol, sugar added drinks and gambling. The main aim behind the imposition of this tax is to reduce the consumption of these kinds of harmful goods and also increase the revenue of government. The revenue gained by government through sin tax used to cover the cost incurred through the consumption of these harmful goods. This revenue allows the government to implement social programmes like raising awareness of consequences about smoking. The major advantages of the sin taxes are discouraging the unhealthy and immoral behaviour of the consumers, providing the fund generation for government to cover the cost, sin tax is more viable to increase government revenue etc. On the other side the disadvantages are the regressive nature of the sin tax through the imposition of taxes over all income group; both poor and rich, creation of illegal activities like black market and smuggling, the reaction of the consumer difference upon the interest of the people.


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