Excise taxes are paid on goods purchased, such as gasoline, or for certain activities, such as wagering or trucks using a highway. Government collection of excise taxes has a long history in the United States.
Post-Revolutionary War
In 1789, the U.S. Constitution authorized the federal government to collect excise taxes. To repay Revolutionary War debt, Congress placed excise taxes on liquor, tobacco, refined sugar, carriages and legal documents.
War of 1812
Congress levied excise taxes to pay for the War of 1812. These taxes were repealed in 1817, and no new excises taxes were levied for the next 44 years.
Civil War
After the start of the Civil War, Congress reimposed the earlier excise taxes with the Revenue Act of 1861. In 1862, Congress extended these taxes to gunpowder, playing cards, feathers, iron, leather, piano, billiard tables, yachts, drugs, patent medicines and whiskey. After the war, most of these taxes, except those on liquor and tobacco, were repealed.
The Twentieth Century
Excise tax rates were increased, and new excise taxes were imposed to finance the Spanish-American War, but these were repealed in 1902. Most excise taxes, except those on tobacco, were repealed or reduced during the 1920s. Excise tax revenues increased in the 1930s, after the repeal of Prohibition. The Highway Trust Fund, set up in 1956, was funded by an excise tax on motor vehicles. The Excise Tax Reduction Act of 1965 cut excise taxes to continued economic expansion. In the early 1970s, some excise taxes, such as those on automobiles and telephones, were extended, and new excise taxes were imposed on air travel. In the 1990s, excise taxes on alcohol and tobacco were increased.
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