It is the excise tax in all its forms that has displaced the direct consumption taxes. The distinguishing feature of this tax is that some resident seller of an article, whether produced in the country or abroad, or the manufacturer of such an article, advances the tax eitherduring the process of its production or at some time before it reaches the consumer. The main purpose of the exciseis to obtain revenue, but the ideas underlying the sumptuary laws, and the desire to use taxation as a means of social and moral reform have dictated some of these taxes or at least the selection of the commodities to be taxed. The fact that the consumption of certain articles like spirituous liquors, tobacco, and playing cards is condemned in itself, and that such articles are regarded as unnecessary luxuries has led governments to disregard, or, indeed, to favour, the repressive tendency of the tax upon the use of them. It is felt that in case the tax should lessen the consumption, the gain to the community in moral and social well-being would more than offset the loss to the treasury in revenue. Moreover the consumption of such articles is not, it has been found, liable to serious diminution on account of the tax, unless, as in the case of the French tax on tobacco, it is very high.

In the seventeenth century there was a marked tendency to multiply excise taxes. So strong did this tendency become that not a few able writers advocated a general excise as the most just form of tax.1 Many of the recent suggestions for the reform of taxation in France are in the same direction. This tendency can be easily explained by rapid multiplication of taxable commodities. It was urged that the ease with which such taxes were shifted ensured in the end perfect justice. It was also often urged that consumption is more or less voluntary, and any one who finds the tax too heavy can avoid it or lessen it by curtailing his consumption of the taxed article. Thus if the taxed articles are not important necessities the contributor has a certain control over his share and can suit it to his means. If the tax is on a luxury, he has absolute control over his contribution.

1 Cf. Cohn, p. 336 ; Seligman, Shifting and Incidence, pp. 12 ff

But modern investigations into the character of distribution and consumption would seem to indicate that these views are erroneous. There is no doubt that consumption is a very poor criterion of tax-paying ability. What a man spends is no indication of his tax faculty. There are also some important administrative difficulties. The yield of these taxes is beyond the control of the fiscal officers. If more revenues are needed, it is not always possible to obtain them by raising the rates, since a rise in the rate may, in fact, lessen the revenues by lessening the demand for the articles. They are not variable at the pleasure of the treasury. It follows therefore, that a system of excises would be extremely inelastic. But as parts of a system, the elasticity of which is provided for by other elements, they have proved very valuable on account of the relative ease of administration, and the large returns which they can be made to yield. In England, Russia, and France the returns of the excises and customs duties are about one-half of the national revenues. In Germany the constitution confers upon the Imperial legislature the power to regulate the customs and excises upon domestic productions of salt, tobacco, spirituous liquors, beer, sugar, and syrup.1 The commonwealths of the Empire do not levy excises on the articles above mentioned except Bavaria, Wurtemberg, and Baden. The Empire cannot tax any other articles. In the United States the federal government derives nearly half its revenues from excises and an almost equal amount from customs.

1 Burgess, Political Science, II., p. 174.

The following principles have been developed as governing the returns obtainable from excises: (1) Articles which are regarded as necessaries and which naturally have or can have a wide consumption, are very suitable under this tax for obtaining large revenues. In this case the operation of the tax is like that of a poll tax. The French gabelle is an example. The effect of these taxes, if high, is possibly to curtail consumption and possibly to cause a substitution of other similar articles not taxed. Possibly, too, they may curtail the consumption of other articles by lessening the money available for their purchase. But even with a low rate, these taxes are extremely productive, on account of the large number of contributors. The objection to burdening necessaries and rendering the existence of the poor harder, leads, however, sooner or later, to their abolition. These, like the poll taxes, recognise no differences in ability. They are, however, good sources of revenue in cases of extreme need. (2)Luxuries and comforts may be taxed heavily. The general principle is to select those luxuries of the widest consumption as the objects of the heaviest taxes. Thus alcoholic liquors and tobacco are universally taxed in this way. In the United States they form almost the sole objects. In times of special need it is customary to press the semi-luxuries or comforts into service. Here again, the choice is made of articles of widest consumption ; such as coffee, sugar, silks, chocolate, etc. In most modern excise systems, the heaviest burden falls upon luxuries. In England, where the receipts from excises are 30 per cent of the total revenues, the chief burden falls upon spirits (15,189,000) and beer (9,536,000). In France, aside from the octroi, the chief excises are on beer, wine, spirits, and tobacco, then on sugar, salt, and playing cards. In Germany, apart from the city gate taxes, they fall upon alcoholic drinks, tobacco, and sugar. There are special difficulties which Germany encounters in the administration of these taxes, due to deep-seated historical prejudices on the part of the commonwealths of the Empire. Moreover, the yield is not as large as it might be because of the bounties on sugar exported. Modern excises are, then, mainly taxes on alcoholic drinks and tobacco with the addition of a few other duties upon playing cards, etc., and in cases of great need, upon a few articles of large consumption.