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43 Tax Features 1 (1999)

handle is hein.tera/taxfeaturs0043 and id is 1 raw text is: TAX* FOUNDATION TAX FEATURES www. taxfoundation. org January 1999 Volume 43, Number 1 New Tax Foundation Study Confirms Regressivity of Excise Taxes, Suggests Reform Goals of Fundamental Tax Reform Helped by Integrating Excises A new study by Tax Foundation economist J. Scott Moody, Background Paper #29: Fed- eral Excise Taxes and the Distribution of Taxes Under Tax Reform, finds that taxpayers who report less than $10,000 in adjusted gross Distribution of Federal Excise Tax Burden by Income Class Fiscal Year 1998 4% = 3% co) 0/ 0D2% 0) C 0) 2 1% (L 0 Under $10,000 $20,000 $30,000 $40,000 $50,000 $75,000 $100,000 $200,000 $500,000 $10,000 to to to to to to to to or more $19,999 $29,999 $39,999 $49,999 $74,999 $99,999 $199,99$499,999 Source: Tax Foundation. Adjusted Gross Income Tax Neutrm Business S Internet T income pay 3.3 percent of their total tax burden in federal excise taxes. In contrast, individuals and families with incomes over $500,000 face an effective excise tax rate of only 0.6 percent (see chart at left). The study was unveiled Friday, January 15, at a three-day conference in Amelia Island, Florida, the same day that stories appeared in the nation's newspapers confirming that the Presi- dent would propose a 55¢ per pack hike in the federal tobacco excise in his State of the Union address. The results of the study corroborate recent Congressional Budget Office research. CBO found that in 1995 individuals and families with less than $10,000 in cash income faced an effective excise tax rate of 3.9 percent, while people making over $200,000 paid only 0.3 percent. Among federal excise taxes, the tobacco tax currently trails only transportation excises in its impact on the poor. Today's federal tobacco excise tax rate is 24¢ per pack and is already scheduled to rise to 39¢ per pack by 2002. President Clinton's proposed hike of 55¢ would therefore raise the federal tobacco excise to 94( per pack, triple what predominantly low-income smokers face today. Excise Taxes continued on p. 8 ity and Fairness to Small hould Be Watchwords of mxation Policy (S, Senator Bob Graham (D-FL) 4-5

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