Excise taxes impose growing burden on the poor

Excise taxes on items such as cigarettes, alcohol, gasoline and telephone service may be a minor nuisance to a wealthy person, but they take up a significant share of a low-income family's income, say Michael L. Davis, senior fellow at the National Center for Policy Analysis (NCPA), and Robert McTeer, a distinguished fellow at the NCPA.


  • One-third of lower-income U.S. adults smoke, versus one-fifth of middle- and high-income earners, according to the Centers for Disease Control and Prevention.

  • High school dropouts who smoke spend three to four times as much of their income on tobacco products as professionals who smoke.

  • The portion of income spent on alcoholic beverages by the lowest fifth of earners is double that of middle earners and more than three times that of the highest earners, on average.

    As if taxes on cigarettes and alcohol weren't enough, poorer taxpayers are also disproportionately burdened by excise taxes on necessities such as gasoline, utilities and telephone services:

  • Statistically, people making $24,000 a year spend more than twice as much of their income on gasoline as those earning five times as much.

  • People making less than $10,000 a year spend nearly one-fifth of their incomes (18.8 per cent) on necessities subject to excise taxes, including utilities and public services.

  • They pay almost six times as much of their incomes on these taxes as the highest earners.

    Some health policy advocates claim taxes on harmful behaviours encourage people to change their behaviours in socially desirable ways. But this paternalistic argument is really disingenuous – these taxes are designed to raise revenue, not discourage unhealthy behaviour. Overall, this new system of raising taxes on "sins" and necessities is actually punishing those who have the temerity to be poor.

    Source: Michael L. Davis and Robert McTeer, Excise Taxes Impose Growing Burden on the Poor, The Heartland Institute, October 1, 2007.

    For text: http://www.heartland.org/Article.cfm?artId=21931

    For more on Taxes: http://www.ncpa.org/sub/dpd/index.php?Article_Category=20

    FMF Policy Bulletin/ 11 September 2007
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