Why does the government impose excise taxes?


Quick Answer

The government imposes excise taxes, just like any other tax, to raise money for the government and its programs and services. Excise taxes are imposed on specific goods such as gasoline and activities such as wagering and highway usage, according to the Internal Revenue Service. The taxes are typically included in the price of the product.

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Full Answer

Alexander Hamilton first introduced the idea of excise taxes around 1789. The United States had just emerged victorious from the Revolutionary War, and Hamilton proposed taxes as a way to help the U.S. government raise money and good credit for trade, according to Wikipedia. Because excise taxes are assumed in the price of the product or service, and the taxes are paid by businesses and imposed on a limited list of products and activities, Hamilton suggested these taxes could be a regular and easily-collectible source of income.

Fuel has been a major source of tax income for the U.S. government since the Tariff Act of 1789 was passed, according to Wikipedia. Due to technological advancements and an increased concern for the environment due to oil drilling, Congress created a tax credit program called the American Taxpayer Relief Act, which was enacted in 2013. The Relief Act gives natural gas tax credits that include a biodiesel mixture credit, biodiesel credit, alternative fuel credit and alternative fuel mixture credit.

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