Gun violence in America has become a major topic of discussion in recent years. As tragedies occur, fervor to explore the nature of violence and gun control has led to numerous policy suggestions regarding gun purchases. One such measure is substantially raising current firearms taxA tax is a mandatory payment or charge collected by local, state, and national governments from individuals or businesses to cover the costs of general government services, goods, and activities. es, as per a recent bill sitting in the federal House written by Representatives Danny Davis (D-IL) and Bill Pascrell (D-NJ).
The bill looks to substantially increase tax rates on conventional firearms (pistols, rifles, shotguns, etc.) to 20 percent, while raising ammunition taxes dramatically from 11 to 50 percent. The revenues generated would be used to fund the hiring and training of additional police officers, various community-oriented projects to prevent gang violence, and other such public safety ventures.
The law of demand certainly applies here; some buyers will be deterred from paying exorbitant rates to purchase guns and ammunition. But levying taxes on gun owners versus owners of other products creates a control program which ought to be outside the purview of tax policy. This law in particular is even more distortionary given that these taxes are also imposed on all gun-owners, even responsible, non-criminal ones. Noted tax expert David Brunori addressed this issue well last March (subscription required):
The idea is that an excise is appropriate when it's used to compensate society for the external costs of using a product. In basic tax school, we call those costs externalities. Say I live in southern Illinois, far from any high-crime area. I own a .22 rifle because I like to shoot empty beer cans. And maybe I own a .45 automatic in the unlikely event of a home invasion. I've never committed a crime. And let's stipulate that I'll never commit a crime because most gun owners never will. And I don't hunt because I'm a vegetarian and don't like to shoot critters.
Exactly what externalities am I responsible for? Neither I nor my ammunition has ever been to a high-crime area.
We think this gets at the crux of the issue. Sensible policy to address violent crime is important, but excise taxAn excise tax is a tax imposed on a specific good or activity. Excise taxes are commonly levied on cigarettes, alcoholic beverages, soda, gasoline, insurance premiums, amusement activities, and betting, and typically make up a relatively small and volatile portion of state and local and, to a lesser extent, federal tax collections. es are far too blunt an instrument to use to get there.
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