An Overview of State Excise Taxes: How They Vary and Why
If you’ve ever heard the term “excise tax” and wondered what it means, you’re not alone. Excise taxes are paid on specific goods and services, like gasoline, cigarettes, and alcohol. They’re a type of indirect tax that can have a big impact on consumers. State excise taxes, in particular, can vary greatly from state to state. This article will explore what state excise taxes are, how they vary, and why they’re important to consider.
What are State Excise Taxes?
State excise taxes are taxes that are imposed on specific goods or services by individual states. These taxes are typically added on top of other taxes, like sales tax or federal taxes. Excise taxes are different from sales taxes because they’re imposed on specific goods rather than all goods sold within the state. Some common items that are subject to state excise taxes include gasoline, cigarettes, and alcohol.
State excise taxes can be levied on a per-unit basis (like per gallon of gasoline) or as a percentage of the price of the item (like a percentage of the price of a pack of cigarettes). The amount of excise tax collected varies from state to state and depends on the specific item being taxed.
How Do State Excise Taxes Vary?
State excise taxes can vary greatly from state to state. For example, as of 2021, the excise tax on a pack of cigarettes in New York is $4.35, while in Virginia it’s only $0.30. Similarly, the excise tax on a gallon of gasoline in Pennsylvania is $0.588, while in Alaska it’s only $0.0804.
The differences in state excise taxes can be due to a variety of factors. Some states may impose higher excise taxes as a way to discourage the use of certain items (like cigarettes or alcohol). Other states may use excise taxes to fund specific projects or programs (like road maintenance or education).
Another reason for the variation in state excise taxes is that some states have higher costs of living, which can impact the price of goods and services. For example, a gallon of gasoline might cost more in California than in Alabama, which can impact the amount of excise tax collected. The same can apply to cigarettes and alcohol, which might be more expensive in some states than others.
Why Are State Excise Taxes Important to Consider?
State excise taxes can have a big impact on consumers. For example, a higher excise tax on cigarettes can make smoking more expensive for consumers, which can be a deterrent to smoking. Similarly, a higher excise tax on gasoline can impact the cost of driving. These taxes can also impact the revenue that states collect – in 2019, state excise taxes on motor fuel alone generated over $37 billion in revenue for states.
State excise taxes can also be a way for states to generate revenue without increasing other taxes. For example, if a state is facing a budget deficit, they might choose to raise excise taxes on specific items rather than increasing sales tax or income tax for all residents.
Another reason why state excise taxes are important to consider is that they can impact the economy. For example, a higher excise tax on cigarettes might lead to a decrease in cigarette sales, which can impact businesses that rely on cigarette sales (like convenience stores or gas stations). Similarly, a higher excise tax on gasoline might impact the cost of transportation for businesses, which can impact their bottom line.
Conclusion
State excise taxes are a unique type of tax that can have a big impact on consumers, businesses, and state governments. While the specific taxes and amounts collected can vary greatly from state to state, it’s important to consider them when analyzing the economy or budget situation of a state. By understanding state excise taxes, you can better understand the economic landscape of a state and how it impacts its residents.