Theme 5: Impact of TaxesLesson 1: How Taxes Influence Behavior

Three illustrations representing different taxes. A pack of cigarettes represents the sin tax. A gas pump represents the gasoline excise tax.A car represents the luxury tax.

Legislators have three needs in mind as they prepare tax laws- -the need to raise revenue, the need to be fair to taxpayers, and the need to influence taxpayers' behavior. Below are three excise taxes that have affected the economy and consumers' behaviors. All are direct taxes.

A sin tax is used to discourage the use of products and services that could pose a risk to someone's health, such as alcohol and cigarettes. Puritan colonists used the earliest sin taxes in this country.

The gasoline excise tax is a user tax on gasoline purchases. People who use gasoline pay taxes on it. These revenues maintain and build roads and highways and regulate underground pollution related to gas storage. Urban area mass transportation is developed and maintained by gas tax revenue.

Luxury taxes are taxes on expensive, nonessential items, such as luxury cars. Revenue from luxury taxes is redistributed through government programs that benefit all citizens.

materials:

Activities

Activity 1: The Cigarette Tax Determine if the cigarette tax is high enough to discourage smoking.

Activity 2: The Gasoline Tax Calculate the tax you'll pay for gas in four states.

Activity 3: Tax Scrambler Tax your brain in this fun activity!

Activity 4: Tax Scrambler Unscramble tax vocabulary.

Assessment

Complete the assessment page to test your understanding of How Taxes Influence Behavior.

Links

If you would like to learn more about how excise taxes affect you, check out Theme 4, Lesson 1.

quick check

Why is the cigarette tax considered a sin tax?

tax trivia

Before the income tax, the government often put new excise taxes into effect in order to raise revenue during times of crisis. Many taxed items were considered luxury items. Taxes on most items were dropped as the items became less exclusive or as the need for emergency revenue decreased. Other taxes were kept in place because they generated a great deal of revenue for the government.

Test your tax trivia knowledge by answering the following multiple-choice question. Click on the correct answer. To assess your answer, click the Check My Answers button.

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