Final answer:
Excise taxes are federal taxes levied on specific goods such as gasoline, alcohol, and tobacco, and they form a smaller yet stable portion of federal revenue, maintaining about 2% to 3% of GDP over several decades.
Step-by-step explanation:
Excise Taxes and Federal Revenue
Excise taxes are a form of taxation imposed by the federal government on the sale or manufacture of specific goods and services. Common examples of products subject to federal excise taxes include gasoline, alcohol, and tobacco. These targeted taxes are considered indirect taxes, meaning they are often included in the price of the product and paid by the consumer. Excise taxes are an essential source of federal revenue, although they represent a smaller proportion compared to personal income taxes and payroll taxes.
In fiscal year 2010, excise taxes, along with estate and gift taxes, customs duties, and miscellaneous receipts, made up the balance of federal revenues beyond the dominant individual income and corporate taxes. Over the past several decades, the portion of revenue from excise taxes has diminished relative to other sources. Nonetheless, excise taxes continue to be a stable source of income for the government, contributing to services like military, education, and infrastructure. According to the Congressional Budget Office, excise tax revenues have persistently constituted around 2% to 3% of the GDP from the 1960s through 2020.
These taxes are particularly significant as they can also serve to discourage the consumption of products considered harmful to health or the environment, adding a regulatory dimension to their fiscal role.