Excise Taxes on Alcohol, Tobacco, and Gasoline: History and Inflation Adjusted Rates

Publication Date: March 1997

Publisher: Library of Congress. Congressional Research Service

Author(s):

Research Area: Banking and finance

Type:

Abstract:

Receipts are no longer a major source of federal revenue. In FY1997, they are estimated to represent but 3.8% of total federal receipts. They are projected to slightly increase to 3.9% of receipts in FY1998 and to remain at 3.9% in FY1999, before decreasing to 3.8% in FY2000. Projections are that they will further dwindle to 3.7% in FY2001. (See Endnote 2.)

This report provides inflation adjusted excise tax rates for alcohol, tobacco, and gasoline products. The base for computation is November 1951; the adjustments show what the tax rates would be if they had been increased to reflect inflation. All of the above cited commodities had rate increases effective for that date under the Revenue Act of 1951. Just as the Congress was prepared to lower excise tax rates because of peacetime conditions, plans had to be revised as a result of the start of the Korean War. Thus, the Revenue Act of 1951 was born out of revenue needs due to increased military expenditures.

A brief history of alcohol, tobacco, and gasoline tax rates since 1951 along with current revenues from these excise taxes is provided. At the end of this report, a table shows the inflation-adjusted excise tax rates using the Consumer Price Index for All Urban Consumers (CPI-U). The CPI-U index numbers for November 1951 through December 1996 were used for computational purposes. With the exception of gasoline and low-alcohol still wine, these inflation-adjusted tax rates are far higher than current law tax rates.