Did you know that when you fill your gas tank, you're paying taxes that aren't sales taxes? How about when you buy a pack of smokes? Or a six-pack of beer? An airline ticket? A motel room? Your cell phone plan?
An excise tax is a tax directly levied on certain goods by our state or federal governments. Nebraska collects an average of $350 in yearly excise taxes per capita, per Tax-Rates.org. The excise tax is a regressive tax, meaning low-income people pay a much higher rate of their total income to support government through this tax. The major items being taxed, gasoline, alcohol, and cigarettes, also tend to be purchased more by low-income people, so most would pay even more.
The excise tax is considered an indirect tax, meaning that the producer or seller who pays the levy to the government is expected to raise the price paid by the buyer of the goods. Since the tax has already been added to the price, most of us are not aware that we've even paid it.
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Many excise taxes go into trust funds for projects related to the taxed product or service. Gas tax, for example, is used for highway construction. We pay 25.6¢ per gallon for gas tax. There are several more excise taxes related to petroleum products.
Some of the others are called "sin taxes," because legislators hope that raising the price will lower the amount sold. The Nebraska cigarette tax raises the price of a pack of 20 by 64¢. Our excise tax on beer is 32¢ per gallon; wine is 95¢ per gallon, and liquor is $3.75 per gallon. Some states also charge excise taxes on marijuana and gambling.
Nebraska charges a cell phone tax in the plan you pay to your service provider. Tax-rates.org says that our excise tax on cell phone plans is the highest in the nation, averaging $18.64 per plan per month.
Our motels collect lodging or occupation taxes, and the money is designed to be used for tourism. We pay taxes on our insurance premiums. There is a tax called the Corporation Occupation tax, which businesses must pay to operate in Nebraska or in certain communities.
The fees we pay for government services are generally counted as excise taxes. This includes motor vehicle registration fees, campsite rental fees, marriage license fees, court filing fees, and any other fees charged by government entities.
The IRS says that federal excise taxes are paid on imported goods, fuel, airline tickets, heavy trucks and highway tractors, indoor tanning, tires, tobacco and other goods and services.
The first taxes charged in America were excise taxes. And excise taxes caused the first violent protest against our new government. In 1791 President George Washington enacted a tax on "spirits distilled within the United States." Farmers in western Pennsylvania raised corn, rye, and other grains. Shipping this harvest east created problems because of poor roads and lack of storage facilities. Most grain was converted into alcohol, which was much easier to transport. By 1794, the Whiskey Rebellion threatened the stability of the United States. President Washington personally led the United States militia westward to stop the rebels, and several were charged with treason.
Excise taxes on a variety of products and imported goods continued to be the primary way used to fund the federal government until an income tax was passed during the Civil War and made permanent by the 16th Amendment to the Constitution in 1913.
Next time you wonder why the price of something is so high, remember that you may be paying not only for the good, but also for the tax.