"Sin" Taxes and Poor Households: Unanticipated Effects

This paper presents several hypotheses relating to the effects that tax hikes on tobacco and alcohol products may have on poor households. Its focus is limited to patriarchal households in which the head is “egoistic” and/or addicted (to alcohol and tobacco) and is also in control of the household budget. It is argued that “sin” tax hikes may adversely affect the welfare of household members other than the head, either directly through a re-allocation of the household budget, or indirectly through higher health expenses caused by the substitution of cheaper and lower quality alcohol and tobacco products for higher quality products.