Excise
The term
excise has more than one legal meaning.
In the United States, the term has a constitutional law meaning and at least one statutory law meaning.
Constitutional law
In the U.S.
constitutional law sense, an excise is essentially an "event" tax (as opposed to a "state of being" tax) (these are not technical legal terms, just pedagogical terms).
An example of a "state of being" tax is an
ad valorem property tax (which is not an excise). It may be imposed on the property or the person who owns that property at a certain moment on (for example) January 1 of each year
based on the state of title at that given moment. The "state of title" (state of ownership) is being taxed. The next year, on January 1st, another such tax is imposed again in the same way on the same property and person, even though there has been no "change" (no intervening "event"). The amount of the tax may change from year to year, based on the change in the value of the property or a change in the tax rate, or both, but those are separate issues governing how the tax is computed. What is being taxed, fundamentally, is the state of title -- and state of title is not an "event" but is instead a "state of being."
By contrast, a realization of income (such as a receipt of wages) is an event. A sale is an event. A transfer of title by gift is an event. A transfer of title because of death is an event. Income taxes, sales taxes, and transfer taxes are all examples of event taxes. When a person receives money as income, it is not the ownership or state of title of the money itself that is taxed, but rather the fact that an income event has occurred. Although the tax is paid with money, that is a separate issue. If the recipient take the money and puts it under his or her bed for ten years, the
income tax is not re-imposed on that money every year the money is under the bed. Only one thing is taxed by the income tax -- the original "income event."
For purposes of the U.S. constitution, an excise is essentially any indirect tax, or "event" tax (with one class of exceptions in short, any tax that is not a direct tax.
For U.S. constitutional law purposes, a duty is nominally in a separate category from an excise. However, a duty is similar to an excise in that a duty is generally imposed on an "event" (such as an importation) and not on a "state of being."
Statutory law
The term "excise" also has a
statutory law meaning. Generally, in the United States any statute that imposes a tax specifically denominated as an "excise" is an excise tax law. The U.S. Federal income tax is not an "excise" in this narrow statutory sense (although most such income taxes
are indeed excises in the
constitutional sense).
An example of an excise is a
tax or
duty levied on the sale or importation of specific
goods or a
fixed rate tax on the sale or importation of specific goods; in this manner it differs from a general
sales tax or
value added tax.
Excise duties usually have one of two purposes: to raise revenue or to discourage particular behaviour. Taxes such as those on sales of
fuel,
alcohol and
tobacco are often justified on both grounds. Some economists suggest that the optimal revenue raising taxes should be levied on sales of items having an inelastic demand, while behaviour altering taxes should be levied where demand is
elastic.
A common example of an excise tax is the tax on sales of cigarettes: a fixed fee on each pack of cigarettes sold. The cigarette excise tax varies by state and ranges from 7 cents per pack in
South Carolina to $2.46 per pack in
Rhode Island. The excise tax doubles or even triples the retail cost of cigarettes in some states, but can be still avoided in many states by buying
tobacco and
cigarette paper separately.
A reason why the governments state that excise taxes should exist is to internalize
external costs. For example, the alcohol excise tax could be used to pay for the treatment of alcohol-caused diseases.
The state of Hawaii raises nearly half its government revenues through the imposition of the General Excise Tax (or GET) in lieu of a sales tax. Hawaii's GET charges businesses 4% on all gross business income and at every level of production. Some agricultural and wholesale activies are charged at a lower rate. Because the tax is charged repeatedly at every level of production (material supplier to manufacturer to wholesaler to retailer to consumer) the tax is effectively a 16 - 18% sales tax on consumer goods. The GET is also charged on all business service activity such as real estate agent commissions, lawyer fees and the like.
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.
Samuel Johnson's
A Dictionary of the English Language defined
excise in
1755 as
A hateful tax levied upon commodities, and adjudged not by the common judges of property, but wretches hired by those to whom excise is paid.While presenting before the Supreme Court, Mr. Edward F. McClennen described the excise tax as follows::"Excise," in England and in the Colonies, for at least one hundred and forty years before it was used in the Constitution, meant an inland levy on selected tangible property, or upon the owners of it, because of the activity in which the property was moving, as in the manufacture, in intermediate sale, or in the ultimate sale commonly amounting to consumption. The antithesis was the direct tax upon property in general, certainly land, when taxed on a rate fixed by its static appraised capital value, possibly when measured by its annual unwrought return in rent, income, or products, and, debatably, upon personal property so appraised or judged. Both the direct tax and the excise were preeminently property taxes, a power very odious in its nature, since it authorizes officers to go into your houses, your kitchens, your cellars, and to examine into your private concerns, -- the Congress may impose duties on every article of use or consumption, on the food that we eat, on the liquors that we drink, on the clothes that we wear, the glass which enlightens our houses, or the hearths necessary for our warmth and comfort." Cf. Chancellor Livingston in the New York Convention, 2 id. 341; Nicholas in the Virginia Convention, 3 id. 243; also 5 id. 40; Hamilton, Federalist, No. 21, p. 182; Ellsworth, Connecticut Convention, 2 Elliot 192; Writings of Gallatin, p. 73.
*
Her Majesty's Customs and Excise
