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02/13/2013

Guns and Taxes

Gun trainingWhat do guns and taxes have in common?  More than you may realize.

Heated debate on gun control is causing a re-emergence of arguments on the effect of excise taxes, sometimes referred to as “hidden” taxes, as analysts determine the economic impact of changing laws.

Early on, excise taxes were termed “luxury” taxes affecting mostly higher income individuals.   Excise tax is based on quantity and is a flat amount per item.  Some excise taxes are called “sin” taxes.

The first excise taxes were on carriages and whiskey.  Excise taxes on gasoline and telephones were called “luxury” taxes when they were first imposed.  Now most Americans consider such items necessities.  Raising these tax rates can have dramatic affects on consumer budgets as well as trigger a downturn in consumption.

Consider today’s gun control debate:   The Alcohol and Tobacco Tax and Trade Bureau collects excise taxes on firearms and ammunition from manufacturers and distributors before the products are touched by a consumer.  Numbers show gun sales alone result in annual business and excise tax collections of nearly $2.07 billion.  

Some experts say just the threat of government gun control has been an effective means of raising tax revenues as fear motivates consumers to stock up.  In the last fiscal year, the ATTTB reports tax revenues on the sale of firearms and ammunition have risen 45 percent which is the highest annual increase on record.

Yet, if prices and taxes are too high, or products are banned from the marketplace, it limits the number of people who are able to purchase products, thereby cutting sales and decreasing tax revenues.

No matter which side of the firearms debate you may be on, it’s likely you can’t escape paying excise taxes.  Among hundreds of items that fall under federal excise tax mandates are:

  • tires
  • gasoline
  • coal
  • vaccines
  • firearms
  • communications services including your telephone
  • air travel
  • heavy trucks and trailers
  • "gas guzzler" vehicles and more… 

Currently, most federal tax rates on excise taxes range from 1 percent to 15 percent or higher, when coupled with other types of taxes.

The excise tax on firearms and ammunition is generally 10 and 11 percent.   Many states collect excise taxes on top of these rates.  This is before sales taxes are calculated at the time of sale.

At a time of critical economic conditions and concerns for the country’s fiscal future, experts urge that debate about changes regarding taxation be as carefully considered as the compassion-motivated moral arguments.

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