7. Sin taxes don’t discourage addicts because they need the products that much. High taxes on the rich, however, will discourage them, despite the fact that they are the most driven and innovative individuals in society.
Because elasticity. Look it up.
We can and do impose high taxes on those so called sin products because we know that demand is pretty inelastic with respect to price changes.
We also have pretty good estimates of the response of the wealthy (and, indeed, of the poor to the much higher tax and benefit withdrawal rates they sometimes face) to marginal tax rates.
The advice is therefore that marginal income tax rates should be lower than those sin tax rates.
Because elasticity. Worth looking it up really.