🏺 1600s–1700s: Early Sin Taxes & The Gin Craze
Excise taxes on alcohol appear in England as early as the 1600s, originally as a wartime revenue tool.
By the early 1700s, gin became dirt cheap, and Londoners were drinking an average of 14 gallons per person per year.
The government responded with the Gin Acts (1736, 1743), levying heavy taxes and licensing fees.
Result: Bootleg distilling soared, crime skyrocketed, and gin consumption actually increased — a classic early case of taxes driving underground markets.
🥃 1800s: Excise Duty & Smuggling Empires
Britain’s high alcohol taxes fueled coastal smuggling syndicates, especially in Cornwall, Devon, and Kent.
By the mid-1800s, excise duties were lowered, and smuggling declined. This showed that moderate taxation is more effective than total bans.
Similar stories occurred with tea, salt, and tobacco — overtaxing essential goods created vast black markets.
🍸 1920–1933: US Prohibition
The 18th Amendment banned alcohol sales nationwide.
Outcome:
Bootlegging empires like Capone’s flourished.
Smuggling routes from Canada and the Caribbean exploded.
Industrial alcohol was deliberately poisoned by the U.S. government, killing 10,000+ people.
Speakeasy culture thrived, cocktail innovation soared.
Lesson: Total prohibition made alcohol more dangerous and more profitable for organised crime.
☭ 1920s–1980s: Soviet Samogon
In the USSR, vodka taxes were a major source of state revenue. Periodic attempts to limit alcohol led to a massive rise in homebrewing “samogon” (moonshine).
During Gorbachev’s 1985 anti-alcohol campaign, vineyards were ripped up and vodka rationed — resulting in a thriving black market and deep resentment.
The state’s finances actually collapsed partly because alcohol taxes dried up.
🚬 Modern Sin Taxes: Cigarettes & Cannabis
Heavy taxes on cigarettes (UK, Australia) have created huge illicit markets. Australia has one of the highest cigarette prices in the world (~AU$40/pack), fueling smuggling and counterfeiting.
Meanwhile, legalisation of cannabis in parts of the US shows the opposite effect: taxation without prohibition can undercut illegal trade.
💊 The Modern “War on Drugs”
Prohibition of narcotics has parallels to alcohol bans: high profits for cartels, widespread corruption, and unsafe supply chains.
Countries like Portugal (decriminalisation) and Switzerland (heroin-assisted therapy) show that regulation over prohibition reduces harm and crime.
⚖️ The Arc in a Sentence
Whenever intoxicants are moderately taxed, people grumble but comply. When they’re banned or overtaxed, entire underground economies emerge — from the gin gangs of Georgian London to Al Capone’s empire to modern cigarette smuggling rings.