Final answer:
Excise taxes are specific taxes on goods like gasoline, cigarettes, and alcoholic beverages, used to discourage consumption or to raise revenue. They can impact industries such as medical devices and are often viewed as regressive.
Step-by-step explanation:
Excise taxes are taxes placed on the manufacture or sale of specific goods. These taxes are common on items such as gasoline, cigarettes, and alcoholic beverages. The rationale behind imposing excise taxes may vary; the government can use them to discourage the consumption of what are considered demerit goods, like cigarettes and liquor, or to generate revenue from products they believe consumers will continue to purchase despite the tax. Moreover, excise taxes like those on gasoline often fund related infrastructure projects, reflecting a benefits-received taxation principle. It's important to note that excise taxes are sometimes criticized for being regressive and disproportionately affecting lower-income families who spend a higher portion of their income on these taxed items.
Some industries specifically feel the impact of excise taxes, such as the medical device industry, where the excise tax has been a subject of controversy. Critics argue that such taxes can limit the profitability of industries, affecting start-ups and innovation. Nonetheless, the incidence of the tax burden—whether it falls predominantly on the industry or the consumers—depends on the elasticity of demand and supply for the taxed goods.