Caught cheating: When sin taxes forge unforeseen fallout

From sugar to cigarettes, raising taxes on certain products is intended to discourage unhealthy or undesirable behaviors. These taxes — called sin taxes — may be effective in reducing the use of those products, but is that the only consequence?

In this story published Dec. 14, 2021, on Bloomberg Tax:

We then examine how their likelihood of committing fraud changes around a large increase in federal sales taxes on cigarettes. We find that in the month immediately after the tax hike, smokers ramp up their cheating by about half — this represents an increase of about 1.1 fraudulent trips per month.

David Kenchington, assistant professor of accountancy

Roger White, associate professor of accountancy

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