You're right, they do work like that. But they shouldn't, and they don't have to. If the government wants to maximize its tax revenue, then that makes a lot of sense. What doesn't make a lot of sense is the government telling me what is a sin and what isn't, when my "sinning" only has an effect on me.
This is the extreme libertarian point of view, and of course in many cases is dead wrong. For instance, the phrase sin tax was essentially coined with regard to cigarettes -- and smoking cigarettes in public has been proven multiple times to have massive negative health effects on other people. This is not to say that the libertarian POV is always wrong, or that smoking a cig always hurts others, but just to point out that libertarians can often be tempted to apply absolutes to situations that don't call for them.What doesn't make a lot of sense is the government telling me what is a sin and what isn't, when my "sinning" only has an effect on me.