Cigarettes are a common target of excise taxes.
Excise taxes are levied on specific goods and are paid by consumers when they purchase those items. A local or state government's basic goal for any tax is to raise money to pay for public projects and maintenance, so excise taxes offer a targeted means to achieve this goal.
Types
Though excise taxes vary by state, gasoline, tobacco and alcohol remain two of the most common types of excise tax. Sales taxes apply to nearly all goods sold, so excise taxes offer a means to target specific items. Luxury items remain the most common targets for excise taxing.
Purpose
Purposes for excise taxes vary. So-called "sin taxes" on alcohol and tobacco may be enacted to dissuade consumers from purchasing the item in great quantities. Gasoline excise taxes may be imposed in order to pay for road construction and maintenance. In other instances, excise taxes may be levied to raise money for an unrelated concern, such an excise tax on jewelry to provide for public schools.
Local Variation
In governmental systems like that of the United States, town, county and state governments may all levy excise taxes. Though a steady revenue source for municipalities, these taxes may also significantly increase the cost of certain goods and may disproportionately affect poor residents.
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