Should Government Put a Tax on “Sin” Products?

Philip Kotler
8 min readJan 31, 2021


Among the millions of products and services produced each year, there is a group loosely called ‘sin’ products. Think of “alcohol, cigarettes, and marijuana” as major sin products. Think of “prostitution services” as a ‘sin’ service type. Think of recent efforts to discourage the consumption of soft drinks, candy, and packaged snacks that are high in sugar, salt, and fat.

These are viewed by most people as “unhealthy products and services” deserving some level of social control. The government — whether in a city, state, or nation — might be encouraged to ban, tax, or “scandalize” them to reduce their consumption. The issue is if, when and how should governments undertake to reduce the consumption of these ‘sin’ products and services.

We know that regulating ‘sin’ products poses a difficult challenge. Just read the tragic U.S. history of Congress ratifying the Eighteen Amendment in January 16, 1919 to prohibit the manufacturing, transportation and sale of intoxicating liquors. As a result, alcohol went underground. It was available in speakeasies, private clubs, brothels, and thousands of other locations. The public showed its contempt for the law by continuing to imbibe a refreshment they considered pleasurable. City police would often break in and arrest sponsors and participants, but many more underground venues would sprout up to take their place. The worst thing was that liquor production and distribution fell into the hands of criminals and the bootlegging of alcohol became ever more lucrative. Criminals made so much money that they could bribe politicians and mayors to carry out their “wishes.” Prohibition finally ended 13 years later with the ratification of the Twenty-first Amendment that repealed the 1920 Eighteenth Amendment on December 5, 1933.

Consider the endless effort to put an end to cigarettes and smoking. Tobacco companies for decades glamorized smoking and challenged the claims that smoking was harmful. When the evidence of cigarette’s harmful effects to the heart and lungs became undeniable, tobacco companies had to retreat and state on the cigarette package that smoking was harmful to one’s health. Anti-cigarette groups successful applied a number of tools to reduce smoking, including creating anti-smoking cures, passing higher taxes on cigarettes, circulating photos of dying smokers, and prohibiting indoor smoking in offices and public places. Efforts were made to legally sue tobacco companies to pay for the health injury that various smokers experienced and use the money to intensify anti-smoking efforts.

Alcohol and cigarettes are two extreme examples of ‘sin’ products that have been targeted for social control to reduce or eliminate their consumption. We won’t go into the sordid and failed history of trying to ban another major ‘sin’ product, hard drugs.

The Problem of Obesity and Regulating Products High in Sugar, Salt and Fat

Consider the consumption of ‘foods’ that use too much sugar, salt and fat that clearly contribute to the growing obesity problem in the U.S. and many other parts of the world. The evidence is strong that the heavy consumption of sodas, candy, ice cream and a number of other food products are harmful to long term health. The calories and other ingredients not only make people more obese but liable to more illnesses and shorter lives.

Probably the most recent well-publicized episode of regulation was carried on by New York City’s Mayor Michael Bloomberg. He initially pushed through a sales tax on large size (over 16 fluid ounces) soda bottles. In 2016, the city passed a new sugar tax that affected every sugary drink. Bloomberg wanted companies that produced drinks like Coca-Cola, Gatorade and tonic water to work hard to reduce the amount of sugar in their recipes.

Those who opposed this ‘sin’ tax argued that the tax fell heavily on the poor who were the heavy users of soft drinks, especially large size ones. The critics argued that the tax didn’t really limit consumption and only made the poor poorer.

Sin taxes on soda consumption have been passed in many U.S. states. As early as June 2010, state legislators in Washington state decided that candy, gum, and soda had to pay ‘sin’ taxes. But the taxes typically have been small and not effective in driving down America’s thirst for sugary drinks. The taxes probably have to be passed at a higher level.

In 2015, the U.S. House Ways and Means Committee proposed a provision that would tax soda and candy. This measure was not passed, however.

Sin taxes are even more prevalent in Europe. The Danish government has taxed candy for nearly 90 years! And Denmark was the first country in the world to pass a law banning trans fats, with Austria and Switzerland following closely after.

Romania considered passing a “fat tax”, expanding beyond sodas and candies and trans fats to hit junk food more broadly. The tax would be a percentage of the sale of fast-food products. The revenue would be used to fund investments for improving the health system.

Today Hungary is probably the most active European country trying to reduce the consumption of foods with high fat, salt and sugar content. Hungary imposed special taxes because of the country’s 18.8 percent obesity rate, which is more than 3 percent higher than the European Union average of 15.5 percent. Adult obesity In Germany is 13.6 percent and as low in Romania as 7.9 percent.

Hungary’s obesity is no surprise when you consider their pastry. Hungary’s best known treat after goulash is the dobostorta cake, a five-layer vanilla and chocolate buttercream dessert with a caramel-glazed top layer. Hungarian food uses cooking ingredients such as pork and goose fat and pieces of pure lard.

The Hungarian government argues that foods high in fat, sugar and salt need to be taxed to discourage their consumption and to provide money to pay for increased medical and hospital costs. The “fat tax” includes soft drinks with added sugar, energy drinks with added sugar and caffeine, pre-packaged sweetened products, salty snacks, high salt content condiments, soup mixes, gravy mixes and bases. The “fat” tax is to fall on those who live unhealthily.

A Framework for Policy Decisions on Reducing the Consumption of ‘Sin’ Products and Services

We described many ‘sin’ products and services that governments might target for demarketing and deconsumption.

Let’s consider the following three questions:

1. Should government engage in discouraging the consumption of certain products?

2. What are the most effective tools for reducing unhealthy consumption.

3. How successful are government control efforts likely to be?

Should government engage in discouraging the consumption of certain products?

Supporters of government action to discourage consumption of ‘sin’ products argue that ‘sin’ products are likely to hurt their users and/or others around them. The prohibition of liquor beverages in 1920 aimed to reduce the growing problem of drunkenness. A drunk was in danger of hurting himself or herself and hurting others by driving while drunk. Similarly, the problem of eating unhealthy food is to produce more illness and shorten the lives of their consumers. This not only hurts the individual but his or her family and will raise medical and hospital costs. Taxing these products will hopefully discourage the eating of unhealthy food and at the very least provide additional funds for covering the higher costs of the health system.

However, those against government regulation of ‘sin’ products see regulation as deeply interfering with personal freedom of choice. People should be free to eat what they like and be responsible for the consequences. We have to accept that many people who enjoy ‘sin’ products may end up feeling depressed or troubled. They may go underground to get the products that are banned. This can raise the prices of banned products and lead to increased criminal activity.

Critics say that the government should not act as a ‘nanny.’ Yet the same critics say that it is okay for companies to aim their advertisements at children and build childrens’ interest in eating sugary products. Why can’t government counter these commercial messages? The critics worry that the government will expand their regulations. Government will tell us not to eat steaks because this can injure a person’s heart or because cattle are a big factor in polluting our atmosphere? Will the government arrest persons for driving a motorcycle without a helmet on the chance that they might injure themselves? Will the government outlaw the game of football to reduce the number of head concussions? This “slippery slope” argument is often raised.

Generally, each ‘sin’ regulation proposal has to be discussed on its merits. Some level of social control will occur when there is high citizen consensus favoring control and high social cost of damage when the control is missing. Normally the government will pay attention to the percentage of local citizens favoring or opposing social control. In 2013, a Harris Interactive/Health Day poll showed that twice as many people were against government taxes on sugar drinks and candy. Two-thirds agreed with the statement, “It should not be the role of government to influence what we eat and drink to make healthier choices.” This type of finding will help those who oppose regulation.

What are the most effective tools for reducing unhealthy consumption?

The following four tools are used by social marketers to reduce the consumption of ‘sin’ products.

1. Banning. This involves making consumption of a ‘sin’ product illegal. Banning is the tool used to prevent or reduce hard drug use. The penalty for using or distributing heroin or crack is a jail sentence. However, this is usually ineffective in preventing hard drug use. The very people who consume hard drugs need the drugs. They will do almost anything to get the drugs. Banning these drugs lead, as they have with prohibition, to underground use and the growth of criminal activity. Banning also has the effect on some people of glamorizing the use of the “forbidden fruit.” Every time a certain book title is banned, it leads to more interest in reading the book.

2. Taxing. Many government agencies seek to tax ‘sin’ products or services. Hungarians spend 17 percent of their income on food, and they pay an extra 25 percent tax on most of the food and drink products they consume. Critics say that the new tax hits low-income groups the hardest, given that they are greater consumers of processed foods. The real question is whether Hungarians will shift away from the taxed food and drink by eating and drinking less or continue and get poorer.

3. Raising the channel cost of getting the product. The government may take steps to limit the physical availability of the product. The Swedish government runs the liquor stores and limits the buyer to get only one bottle of liquor each week.

4. Anti-product campaigns. Governments might hire advertising agencies and digital experts to produce messages about how bad these ‘sin’ products hurt one’s health and appearance. We need to be aware that it is often hard to measure the actual number of consumers who turned away from these products as a result of hearing or seeing the anti-product messages.

How successful are government control efforts likely to be?

This question cannot be answered in the abstract. Attitudes toward ‘sin’ products differ around the world and within each country and city. Citizens in Portland, Oregon may be very supportive of government efforts to reduce the use of ‘sin’ products, but citizens of New Orleans, Louisiana may be very opposed to such efforts. It may be very hard for the whole nation to regulate ‘sin’ products in the presence of so many different attitudes in different parts of the U.S

Sweden and Canada might have the real answer. Both countries have worked hard to encourage parents to raise their children on healthy eating and drinking habits. Parents raise their children to enjoy vegetables and fruit as an important part of their diet. Parents have been made very aware of the danger of too much sugar, salt, and fat. They have discouraged the consumption of alcohol and hard drugs and cigarette smoking. A nation that succeeds in raising the children in the right way will have little need for campaigns against ‘sin’ products. Taxes alone cannot lead to healthier habits.



Philip Kotler

Philip Kotler is the S.C. Johnson and Son Distinguished Professor of International Marketing, Kellogg School of Management, Northwestern University (emeritus)