TABLE 1. PRIVATE-ACTIVITY TAX-EXEMPT BONDS, 1990: VOLUME OF PRIVATEACTIVITY BONDS BY TYPE OF ACTIVITY

Section 5. Federal Excise Taxes

A. OVERVIEW

Excise taxes are a form of consumption tax. That is, they are imposed on the manufacture, sale, or consumption of certain goods or services. In addition, excise taxes are levied on certain occupations, on certain corporate privileges, and on activities that Congress seeks to discourage or prohibit.

Some excise taxes are levied at specific rates per unit. For example, the excise tax for cigarettes is set in cents-per-thousand; the excise tax for distilled spirits is set in dollars-per-proof-gallon; and the excise tax for crude oil is set in cents-per-barrel. The revenue from excise taxes set at specific rates does not vary directly with changes in the price of the taxed commodity or activity. (Of course, the revenue will be affected by changes in the price, if overall consumption of the good is affected.)

Other excise taxes, by contrast, are levied at ad valorem rates. For example, the excise taxes on firearms and ammunition are set at a percentage of the manufacturer's sales price.

The purposes of excise taxes vary. Certain excise taxes are collected as a user-related tax for the enjoyment of a government service or benefit. Some excise taxes of this type are placed in trust funds to finance services related to the taxed activity. These funds are discussed in detail in section 6 of Part IV of this document. Some excise taxes are imposed for general revenue purposes (e.g., tax on telephone service). Certain excise taxes have been levied for revenue purposes as well as for "sumptuary" (or regulatory) purposes (e.g., taxes on alcoholic beverages, tobacco products, gambling activities).

Certain excise taxes also are imposed to penalize activities Congress seeks to discourage or forestall. An example is the excise tax on failures to fund a pension plan adequately. The tax equals 10 percent of the funding deficiency (that is, the difference between the required contribution and the actual contribution). However, failure to correct the underfunding within a certain specified period results in an excise tax equal to 100 percent of the deficiency. (See table 1 for a listing of so-called "penalty" excise taxes.)

Table 11 shows a schedule of Federal excise taxes in effect as of January 1, 1993, and makes reference to whether revenues from the excise tax are deposited into a trust fund (or other special fund), scheduled dates for expiration of the tax or modification of the tax rate, and the relevant section(s) of the Internal Revenue Code. Table 2 presents data on Federal excise tax revenues for fiscal years 1992-1994. Table 3 shows the excise tax rates on feed

1These tables were prepared by the staff of the Joint Committee on Taxation, and are included in Joint Committee on Taxation, "Schedule of Present Federal Excise Taxes (as of January 1, 1993)" (JCS-5-93), April 15, 1993.

stock chemicals (sec. 4661), and table 4 lists taxable substances subject to the excise tax on certain imported (chemical) substances (sec. 4671).

B. FEDERAL EXCISE TAX RATES

TABLE 1. SCHEDULE OF PRESENT FEDERAL EXCISE TAX RATES
[AS OF JANUARY 1, 1993]

10 Small domestic wineries (those having aggregate annual production not exceeding 250,000 gallons) are entitled to a tax credit equal to 90 cents per gallon (the amount of the wine gallon tax increase enacted in the 1990 Act) on the first 100,000 gallons of wine (other than champagne and other sparkling wines) removed in a calendar year. The credit is reduced by 1 percent for each 1,000 gallons purchased in excess of 150,000 gallons.

11 Wines containing more than 24 percent alcohol are taxed as distilled spirits.

12 $7 per barrel on the first 60,000 barrels removed each year by small domestic brewers who produce less than 2,000,000 barrels of beer during the calendar year.

13 July 1-June 30 is the taxable year for these occupational taxes.

14 Tax is $500 per year per premise for businesses with gross receipts of less than $500,000 in the preceding taxable year.

Tax (and Code section)

B. Tobacco Excise Taxes

15

Tax rates

$1.125 per thousand.

12.75 percent of manufacturer's price (but not more than $30 per thousand).

$12 per thousand (i.e., 24 cents per pack of 20 cigarettes).

$25.20 per thousand.

Large cigarettes (measuring more than 61⁄2 inches in length) are taxed at the rate prescribed for small cigarettes, counting each 24 inches (or fraction thereof) as one cigarette.

16 Cigarette papers measuring more than 61⁄2 inches in length are taxed at the rate prescribed, counting each 24 inches (or fraction thereof) as one cigarette paper. Tax does not apply to a book or set of cigarette papers containing 25 or fewer papers.

17 Cigarette tubes measuring more than 61⁄2 inches in length are taxed at the rate prescribed, counting each 24 inches (or fraction thereof) as one cigarette tube.

18 Tax is $500 per year per premise for businesses with gross receipts of less than $500,000 in the preceding taxable year.