Democratic presidential candidate Hillary Clinton has proposed a change in the top capital gains tax rates. Under current law, such capital gains have a two-tiered structure: short-term gains face a top rate of 43.4...
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- The Federal Archery Tax
The Federal Archery Tax
Did you know there is a federal tax on archery equipment? Maybe not; IRS Form 720 is not a form most taxpayers are familiar with. It is the form for federal excise taxes, and it is only filed by those taxpayers - usually businesses - responsible for collecting the excise taxes. The most important use for Form 720 is for businesses that distribute various kinds of fuel; however, it has a motley array of other miscellanea, including the “tanning tax” from Obamacare.
Because taxpayers don’t see these taxes on their own tax forms, they miss out on these peculiarities. One of the most peculiar of these is a whopping 11% tax on “bows, quivers, broadheads, and points.” This sounds strange at first, but it turns out to make more sense in context.
The Pittman-Robertson Act is an 80-year-old piece of legislation that funds game conservation efforts through taxes on hunting equipment, including bows and firearms. This is largely an arrangement that hunters are happy with; members of the National Rifle Association, the National Shooting Sports Foundation, and other similar organizations often support this tax because it is used to help accomplish game conservation priorities.
The key is that the funds from the tax are marked for purposes that benefit those who are paying the tax. This is called the “benefit principle.” In these particular cases, tax policy that appears “non-neutral” is actually sound because it resembles a voluntary fee paid for services. For example, a tax on bus fares to pay for bus stop upgrades is virtually identical to simply raising the fares to accomplish the same priority.
The Pittman-Robertson taxes are collected at a federal level and only then allocated in block grants to the states in proportion to their land area and the number of hunting license holders. In other words, it is clearly designed to work within the hunting community. Nonetheless, it is not a perfect user fee. For example, an archery enthusiast who does not hunt might still pay the tax, and mostly end up funding the activities of his bowhunting counterparts.
The taxes might be improved if they were collected more locally. For example, hunting licenses could also fund local game conservation efforts even more directly in tune with the needs of the particular state. Overall, though, this tax withstands scrutiny, despite appearing silly on its surface.
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The Tax Policy Blog is the official blog of the Tax Foundation, a non-partisan, non-profit research organization that has monitored tax policy at the federal, state and local levels since 1937. Our economists welcome your feedback. If you would like to send an e-mail to the author of a blog post, please click on that person's name to locate his or her e-mail address or visit our staff page here.