What is an excise tax?
An excise tax is a flat percentage tax added onto the purchase of some item. It works like a sales tax. About 15 years ago the Feds in their infinite wisdom decided to have a 10% excise tax on the first time sale of new luxury items over a certain value. Boats over $100,000 were taxed . The Feds estimated that this would bring in several hundred million dollars.
However, excise taxes generally change behavior since they occur only if someone purchases something. The net result of the luxury boat tax was that no one bought new boats, the boat building industry collapsed and the government not only didn't get the estimated taxes but ended up paying unemployment compensation to the displaced workers! |
