What is an excise tax in economics?

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What is meant by excise tax?

Excise taxes are taxes that are imposed on various goods, services and activities. Such taxes may be imposed on the manufacturer, retailer or consumer, depending on the specific tax.

What is an example of an excise tax?

Excise taxes are internal taxes that are levied on the sale of specific goods and services, such as alcohol, fuel and tobacco. … For example, the excise tax on a vehicle is a percentage of the total cost while the excise tax on a tobacco and gasoline is a fixed amount.

What is the purpose of an excise tax?

Excise taxes can be used to price an externality or discourage consumption of a product that imposes costs on others. They can also be employed as a user fee to generate revenue from people who use particular government services, revenue which should be used to maintain that government service.

What is meant by excise tax quizlet?

An excise tax is a tax on sales of a good or service. The excise tax drives a wedge between price payed by consumers and that received by producers leading to a fall in the quantity transacted.

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What is bad about excise tax?

EXCISE TAXES REDUCE CONSUMPTION AND IMPROVE HEALTH. Excise taxes generally result in higher prices for consumers, reducing demand for taxed products.

What are the two types of excise tax?


  • Specific Tax – refers to the excise tax imposed which is based on weight or volume capacity or any other physical unit of measurement.
  • Ad Valorem Tax – refers to the excise tax which is based on selling price or other specified value of the goods/articles.

What is the major difference between a sales tax and an excise tax?

Whereas sales tax applies to just about everything you buy (usually with specific exceptions such as unprepared food and clothing), excise taxes are applied to specific goods. The most common examples are luxury goods or those that have been linked to specific health issues like cigarettes, alcohol and tanning salons.

What states have an excise tax?

Taxes on Tobacco Help Reduce the Number of Tobacco Users

Location Excise Tax Range Summary Excise Tax Rate
California $2.00 to $3.99 2.87
Colorado $1.50 to $1.99 1.94
Connecticut $4.00 to $6.00 4.35
Delaware $2.00 to $3.99 2.1

What states have no excise tax?

Most states have sales tax to help generate revenue for its operations – but five states currently have no sales tax: Alaska, Delaware, Montana, New Hampshire, and Oregon.

Is Real Property tax An excise tax?

Real estate excise tax (REET) is a tax on the sale of real property. All sales of real property in the state are subject to REET unless a specific exemption is claimed. The seller of the property typically pays the real estate excise tax, although the buyer is liable for the tax if it is not paid.

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What is the difference between an excise tax and a sales tax quizlet?

One difference between sales and excise taxes is that: sales taxes are calculated as a percentage of the price paid, while excise taxes are levied on a per-unit basis. Government lotteries are: used by a large number of states to supplement their tax revenues.