Federal Excise Taxes: Constitutional Basis, Origins, and Use in the United States
The FAIRtax, a national retail sales tax, is an excise tax. Excise taxes have been used to fund federal government activities since the beginning of the Republic.
Excise taxes are taxes imposed on goods, services, or activities rather than on income. The Internal Revenue Service describes them as taxes that can apply at different points in the chain of commerce, including importation, manufacture, retail sale, or final use.
Today they apply to items and activities such as motor fuels, aviation, alcohol, tobacco, firearms and ammunition, certain environmental chemicals, and some corporate stock repurchases.
The constitutional authorization for federal excise taxes appears in Article I, Section 8 of the U.S. Constitution, which gives Congress the power “to lay and collect Taxes, Duties, Imposts and Excises” to pay debts and provide for the common defense and general welfare. The same clause also requires that “all Duties, Imposts and Excises shall be uniform throughout the United States.” That means federal excises must operate with geographic uniformity across the country.
Unlike federal income taxes, excise taxes did not need the Sixteenth Amendment for their existence; they were part of Congress’s original taxing power from the start.
Federal excise taxes began very early in the republic. In 1791, under President George Washington and at the urging of Treasury Secretary Alexander Hamilton, Congress enacted the first nationwide internal revenue tax: an excise tax on distilled spirits, often called the Whiskey Tax. It was adopted to help service the national debt that followed the Revolution and quickly became one of the earliest major tests of federal power, leading to the Whiskey Rebellion in 1794. The episode mattered not only for revenue but also because it demonstrated that the new national government could enforce its tax laws.
In the early nineteenth century, excise taxes rose and fell with fiscal need. According to the Congressional Research Service, internal excises were repealed in 1802, reintroduced during the War of 1812, repealed again after that war, and then restored on a much larger scale during the Civil War.
After the Civil War, taxes on distilled spirits and tobacco remained especially important, and for decades excise taxes accounted for a substantial share of federal revenue. Excises were later expanded again in wartime and in periods of fiscal stress, including the Spanish-American War and World War I, when Congress taxed a wider range of products and activities.
Over time, however, excise taxes became a smaller part of the federal revenue system., as t The modern income tax and payroll taxes displaced them as the government’s main revenue sources.
Congressional Research Service analysis explains that excise taxes now play a much smaller role than they did before the twentieth century, even though Congress still uses them for targeted fiscal and regulatory purposes. The Congressional Budget Office reported that in fiscal year 2024 the federal government collected about $101 billion in excise taxes out of roughly $4.9 trillion in total revenues, showing that excises remain meaningful but comparatively modest in the federal budget.
Up to the present, federal excise taxes have been used in three main ways. First, they raise general revenue. Second, they function as user charges, with certain taxes dedicated to related trust funds. For example, GAO explains that taxes on gasoline, diesel, tires, and certain truck-related activities support the Highway Trust Fund, while airline ticket and aviation fuel taxes support the Airport and Airway Trust Fund. Third, excises are often used to discourage or offset the social or environmental costs of products or conduct, such as tobacco use or pollution-producing chemicals.
Current federal excise taxes reflect that mixed purpose. The IRS’s current excise-tax guidance shows continuing taxes on motor fuels and other transportation fuels, while recent IRS guidance also notes a 1% excise tax on certain corporate stock repurchases and the reinstatement of Superfund chemical excise taxes effective July 1, 2022.
CONCLUSION
The FAIRtax Act (H.R. 25) is more than just a proposal for a retail sales tax; it is a fundamental restructuring of the federal fiscal structure. Unlike other excise taxes which normally are applied to specific products and in different percentage amounts, the FAIRtax applies a 23% rate to all new retail products and retail services.
THE FAIRTAX IS THE ANSWER.
The FAIRtax is a national retail sales tax on new retail goods and retail services which provides a family credit so that all purchases up to the poverty level for each family are not taxed. There is no withholding from your paycheck, and YOU NEVER HAVE TO FILE A TAX RETURN TELLING THE GOVERNMENT HOW MUCH YOU EARNED AND HOW MUCH YOU SPENT, AND YOU’LL NEVER BE HARASSED BY THE IRS EVER AGAIN.
Many of you have labored tirelessly for freedom from the federal income tax and the IRS. You deserve a great deal of credit for your efforts to educate the American people on the need to fund the American government in a way that is good for America and returns freedom to the American people.
It is imperative, though, that we don’t replace the current income tax and the IRS with an alternative system that can still be manipulated by the Ruling Elite. We must let Congress and the President know that the best way to replace the income tax and the IRS is with the FAIRtax.
Make no mistake about it. The FAIRtax is a grave threat to the Ruling Elites. It will strip them of their power and their ability to control us though the tax system. Their opposition to the FAIRtax will be fierce and unrelenting. And don’t think for an instant that they won’t use half-truths, deception and downright lies in their desperate attempt to hang on to their power.
However, with the support of this President, we can finally eliminate the income tax and the IRS!!!
Of course, the best course of action is to not only repeal the income tax and abolish the IRS but to repeal the 16th Amendment as well so no future administration can ever shackle the American people with an income tax again.
We must come together and ensure that real tax reform, the FAIRtax, is not subverted by the Elites in D.C.
This will take the diligent efforts of all of us. We need your financial assistance, and we need your grass roots assistance.
If you have contacts that will allow us to get more information to President Trump about the FAIRtax please let us know.
Please email us at info@fairtax.org and we will give you some options on how you can best help us.
At a minimum, please call your Congressional representative and ask if he or she supports the FAIRtax. If so, thank him/her for their support and suggest they become a cosponsor of HR-25 if they’re not one already. If not, ask why not. If your representative claims to be unfamiliar with the FAIRtax, offer to have someone come to their office and explain it to them.
Please go to this link to invest in AFFT and help us pass the FAIRtax. It’s an investment in your and your family’s future.
THE SOLUTION—PASS THE FAIRTAX!
Why would D.C. pass the FAIRtax and give up this almost unlimited source of donations? The only way that they will is if the rest of us demand it!
Isn’t it time to end this ludicrous tax collection system and the IRS?
HELP BRING ABOUT REAL TAX REFORM AND STOP FUTURE IRS ABUSES
By contributing (investing) $10.40 per month, you help provide a financial base to AFFT. If you can make larger contributions (investments), these will be used not for salaries, as we are all volunteers, but for the needed updates to our economic studies which will be vital for all future years.
Please go to this link to invest in AFFT and help us pass the FAIRtax. It’s an investment in your and your family’s future.