An excise is an indirect tax or duty levied on items within a country. It can take several forms: a general sales tax or value added tax, an ad valorem tax on specific goods, or a fixed rate tax on specific goods.
Excise duties usually have one of two purposes, either to raise revenue or to discourage particular behaviour. Taxes such as those on fuel, alcohol and tobacco are often justified on both grounds. But theoretical economics suggests that the optimal revenue raising taxes should be levied on items with an inelastic demand, while behaviour altering taxes should be levied where demand is elastic.
Excise taxes can be imposed at the point of production or importation, or at the point of sale. They are usually waived or refunded on goods being exported, so as to encourage exports, though they are often re-imposed by the importing country. Smugglers will seek to obtain items at a point at which they are not taxed and then sell them at price between the pre-tax and post-tax price. They also look to find loopholes, which may exist through importing to different countries, before then exporting to the destination country.
For similar items, excise duties are the same for imported and domestically produced goods; if the tax is different, then there is an explicit or implicit customs duty or tariff.
Excisetaxes are an example of what have been traditionally called indirect taxes: taxes that are imposed on a transaction rather than directly on a person or corporation.
Excisetaxes are narrow-based taxes, as compared with broad-based taxes on consumption such as a general sales tax, a value-added tax, or an expenditure tax.
Excisetaxes are sometimes used as a means of implementing an ability-to-pay approach to taxation.
Excisetaxes, therefore, may justly be assigned a permanent place in the tax structure, viewed as supplements to the income tax and designed in part to bolster depression revenues but more particularly to supplant direct taxes on the lower income groups.
The tax on oleomargarine is of a regulatory nature and is predicated on non-fiscal considerations of a character which for the present were not evaluated.
The three groups of excises generally classified as manufacturers' excisetaxes, miscellaneous taxes and stamp taxes, with the exception of those imposed on oleomargarine, alcoholic beverages and tobacco, produced approximately $44,000,000, $391,000,000, $552,000,000, $490,000,000 and $538,000,000 during the fiscal years 1932, 1933, 1934, 1935, and 1936, respectively.
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