A Tale of Two Troublemakers: Alcohol and Firearms

 

Although the Federal Excise Tax (FET) on distilled spirits was lowered recently for small producers, it remains $13.50 per proof gallon* for most beverage spirits sold in the United States, a rate that was set in 1985. Raising taxes on beverage alcohol products even higher has been part of some health care plans presented to Congress. Sixteen dollars per proof gallon has been widely proposed. Increasingly, health care costs related to alcohol consumption are cited as justification for higher beverage alcohol taxes at all levels of government, and beverage alcohol (beer, wine and spirits) is taxed at all levels of government.

It may surprise you to learn that a federal excise tax of 10-11 percent on the import and production of guns and ammunition has been in effect, at the same rate, since 1919. The National Firearms Act of 1934 (NFA) imposed a $200 tax on manufacturers for the transfer of a very narrow set of weapons and that too has not changed since its enactment.**

The argument in favor of these punitive taxes is simple and superficially attractive. The use of tobacco and alcohol, the usual suspects, is unhealthy and increases healthcare costs. Gasoline is taxed the same way for similar reasons, related to the cost of motor vehicle infrastructure and, increasingly, to reduce climate change harms. Higher taxes on products deemed inherently unhealthy or harmful are justified to help pay for the healthcare and other expenses caused by those products and borne directly by government programs such as Medicare and Medicaid, and infrastructure grants. In this way, tobacco, alcohol, and gasoline users pay for the consequences of that use, whether through healthcare, pollution abatement, or highway maintenance. 

The money raised by the firearms FET funds wildlife conservation and hunter education programs. 

If you buy a bottle of whiskey for $25, a nice bottle of Wild Turkey 101 perhaps, you have just made an FET payment of about $7.50, plus another few bucks for state and local taxes, all of which are much higher for Wild Turkey bourbon than they are for, well, actual turkey.

Rarely considered for similar higher taxation due to harms caused are firearms, ammunition and related products.  

Before you unholster your best 2nd Amendment rant, consider this a thought exercise in how policy toward these two different product categories is approached. Considering how often alcohol and gun violence go together, the exercise would seem to have some validity.

In addition to funding care for the harm they cause, higher taxes on disfavored products cause prices to go up, thus discouraging consumption and reducing the harm and associated healthcare costs. According to RAND, "a wide body of research has found that taxation can serve as an effective policy lever for reducing consumption and consumption-related harms." Studies show price increases prompted by higher taxes may or may not affect consumption depending on many factors, but even when they don't, money is raised to fund mitigation. Either way, it seems like a logical bit of social engineering so far. 

If it makes sense to engineer society in this way with regard to alcohol, tobacco, and gasoline, why not include other harmful products?

There are many possible candidates in the category of foods and beverages, especially products that are high in saturated fat, sugar, or salt that have minimal nutritional value, such as ice cream, candy, potato chips, and soft drinks. The harm they cause is comparable to that caused by alcohol and tobacco.

The same logic suggests fattening foods, guns, and ammunition should be taxed the same way alcohol and tobacco are, but just as alcohol, tobacco, and gasoline are taxed at all levels of government, food production is often subsidized, and taxes on firearms and ammunition are rare. 

They are also disfavored at law. In 2016, a U.S. territory passed a $1,000 tax on all pistol sales but it was struck down by a federal court as imposing "an undue burden on individuals' ability to exercise their constitutional rights."

One advantage of an excise tax increase is that it would be levied on manufacturers and thereby become part of the price each time the weapon changes hands, even extra-legally. Since handgun sales impact both law enforcement and healthcare costs, the argument for recovering some of that cost through taxation is very strong, even if the higher prices don't directly impact gun violence by reducing consumption. The Second Amendment is not impacted unless the tax is so high it unreasonably limits the ability of people to lawfully bear arms. No one has construed the Second Amendment as saying the right to bear arms has to be free or cheap.

Using the Federal Excise Tax on Distilled Spirits as an example, a proportional excise tax on firearms and ammunition would raise the price by about 30 percent. Since no one is harmed by mere ownership of a gun, perhaps it makes more sense to only tax ammunition this way. That would be more parallel to alcohol, tobacco, and gasoline taxes.

At present, regulations for ammunition sales are less stringent than those for firearms. No license is required for sellers and no background checks are required for buyers. In a survey at Cook County Jail (Chicago), inmates arrested for gun offenses said ammunition was easier to get than guns, yet reducing gun violence by tightening up and taxing ammunition sales has never been tried. 

If high taxes are okay on Bulleit Bourbon but not on actual bullets, why not?

If nothing else, this thought exercise should persuade you that all taxation is essentially arbitrary and like everything else in our society, it is a function of power and privilege merely obtained and held and not, in any sense, earned or justified.

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* A 'proof gallon' is one gallon of beverage alcohol that is half alcohol and half water, i.e., 100° proof, or 50 percent alcohol-by-volume (50% ABV).

** Rosanna Smart, "Firearm and Ammunition Taxes," RAND Corporation, April 15, 2021.