Excise - Rationale

Rationale

In defense of excises on strong drink, Adam Smith wrote: "It has for some time past been the policy of Great Britain to discourage the consumption of spirituous liquors, on account of their supposed tendency to ruin the health and to corrupt the morals of the common people." Samuel Johnson was less flattering in his 1755 dictionary: "EXCI'SE. n.s. ... A hateful tax levied upon commodities, and adjudged not by the common judges of property, but wretches hired by those to whom excise is paid."

Monies raised through excise are often earmarked for redress of specific social costs commonly associated with the product or service being taxed. Tobacco tax revenues, for example, might be spent on government anti-smoking campaigns.

Excise duties or taxes often serve political as well as financial ends. Public safety and health, public morals, environmental protection, and national defense are all rationales for the imposition of an excise.

• Public safety and health –
  • deter individuals from harming their health by abusing substances such as tobacco and alcohol, thus making excise a kind of sumptuary tax, or
  • deter them from engaging in morally objectionable activities such as gambling and prostitution (see below) (including solicitation and pimping) – thus making it a type of vice tax or sin tax
• Environmental protection -
  • deter individuals or organizations from harming the general environment, including curbing activities which contribute to pollution, or which harm the natural environment.

• Defense - including taxation directly levied on other countries' militaries and/or governments, such as the UK's taxation on "visiting forces"

• Punitive - Many US states taxes on drugs, as well as the UK government impose excise on money laundering and on "visiting forces" (i.e., occupying military forces). These taxes are not considered revenue sources, but rather exist to allow governments greater leverage for punishments and reparations/war reparations - based mainly around tax evasion - which can be imposed in the event that the perpetrator is caught and tried.