In framing and administering a system of excise taxes, a number of difficulties present themselves. Not least among these is the problem of making the taxes conform to the principles of justice in taxation. The old diffusion theory held that any tax, if left in the fiscal system long enough, would finally become so diffused and broken up that it would fall with practically an equal burden upon the whole of society. If this were true the only thing necessary to justify excise taxes would be to leave them till their burden became generally diffused. It is largely from this reasoning that the dictum, an old tax is a just tax, arises.

A moment's reflection, however, will show the fallacy of the above conjectures. Suppose a tax be placed upon one particular commodity - tobacco, for instance, and on no others. It is difficult to see how, no matter how long the tax remained in force, it would place a burden of any moment on others than those who were connected in some way with the production or consumption of tobacco. To argue that such taxes conform to justice is to affirm that the amount spent is the best measure of taxpaying ability. Yet there is little relationship between what a person spends and his ability to bear burdens. One man may have a large family and it will be necessary for him to spend his entire income to provide them with necessities, without any added tax burden, while another man with the same means may have no family to support. Each may spend the same amount, yet their taxpaying ability be entirely different.

Classes of Goods Taxed. - The articles upon which the tax shall be levied are an important consideration in connection with excise taxes. In the earlier development of this form of revenue, attempts were made to place the tax upon every class of commodities, so that equality of burden might be secured. It was even considered by many that this form of revenue should replace all other forms. Such a multiplicity of tax bases, especially in modern times, would present such a detail and expense of administration, and be so prejudicial to the peace of mind of industry and individuals that even to suggest such a policy is to augur defeat.

Since, then, some selection must be made in the number and kind of articles upon which the tax is to be levied, the choice of the items becomes a problem of first importance. The amount of revenue expected to be secured from this source, together with the other taxes which are in use, with their incidence, must be considered. If a large amount of revenue is anticipated the tax must be levied upon a different class of commodities than if only a small amount is to be secured.

From the standpoint of justice excise taxes should not be levied upon articles which would place an undue burden upon a class of people that is particularly hard hit by other taxes. It may be considered either that all should have an exemption equal to a minimum of subsistence, or, on the other hand, that every citizen should contribute to the support of the state.

The articles upon which an excise tax would be placed would differ according to the principle adhered to. If it be deemed wise to exempt a fixed minimum, then no tax should be placed upon such necessities as salt, sugar, flour, and other articles in the class of necessities; if, on the other hand, it be held that all should contribute something to the state, no surer method of accomplishing this can be devised than by placing a tax upon such articles as those just mentioned. If the idea be to make excise taxes provide a sort of progressive element to the tax system, then the levy will be upon objects which enter primarily into the purchases of the richer classes. If the primary object be to secure revenue, with no consideration as to the justice of the incidence, then the objects chosen for the levy would be the class of goods which are considered as necessities by the large middle class of citizens.

In the determination of the rate, where the yield of revenue is the prime consideration, much attention will have to be directed to the elasticity of the demand for the various bases of the tax. The actual results from excise taxes, therefore, because of the many more or less indeterminate factors connected with them, may vary greatly from the anticipations which were in mind at the time of levy.