The author contrasts excise taxes with sales taxes, consumption taxes, licenses, stamp, duties, and other indirect taxes. He describes different types of excises, their relative tax burdens, and how progressive and economically efficient they may be. The main argument for traditional excise taxes, he says, is that they yield substantial revenue with relatively little complaint. A second justification is that the cost of the excessive use of commodities is borne by the purchasers, not by society at large. A third argument is to penalize people for a commodity's use (especially popular with commodities such as alcohol). Arguments against traditional excises: they tend to be regressive, because of the low income elasticity of demand, and they place an unequal burden on families at given income levels. They deprive families of the funds for milk and other essential items, without reducing consumption of taxed goods. High rates tend to increase smuggling and illicit production, often of inferior, even dangerous, substitutes. And the case for them is not strong, resting as it often does on moral grounds. But excise taxes are sure to continue as they yield revenues and are generally more acceptable than other sources of revenue, such as income taxes. Taxes on motor fuel and related motor vehicle levies are among the three most productive excises. They are justified as a charge for the use of roads, in lieu of tolls. In Western Europe, they are seen as progressive, as reaching the people most able to pay -- and incidentally as reducing road congestion. Criticism of such taxes centers on how best to attain desired goals -- for example, sorting out the relative burdens on light and heavy vehicles. Luxury excises tend to be applied to commodities and services with a high income-elasticity of demand, the assumption being that they will reach the people best able to pay them -- achieving equity without relying on increased income taxes, which are difficult to enforce in developing countries and hurt incentives. A luxury excise tax, limited to certain items, is viewed as being progressive, which a sales tax rarely is. But if various rates apply, compliance and administration become complex, and consumers may discriminate among closely related commodities. Moreover, the goods taxed are often widely used by lower income groups (sugar and kerosene are prime examples). For these reasons, many countries are introducing sales taxes, with few rates or a single rate (with exemptions), with simplified processing, and with less ambiguity about what is or is not taxed.
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