The End of a Nuisance?

A hundred and seventy years ago this month, George Washington dispatched a force of 16,000 troops to put down the Whiskey Rebellion, an uprising of western Pennsylvania corn farmers against the federal excise tax on distillers. The rebellion was subdued, but the clamor against excise taxes--a form of national sales tax levied on certain goods and transactions--still goes on. Both businessmen and consumers have long considered the excise tax a bothersome burden. In this election year, the issue is one of the few on which both presidential candidates seem to agree: the Democratic platform pledges to eliminate many excise taxes, and Barry Goldwater--reiterating a long-held Republican position--last week promised to "cut nuisance taxes imposed on so many of the things you buy."

Expense & Dampener. Excise taxes have traditionally come and gone as temporary sources of wartime revenue, but during World War II they came and stayed--and were added to during the Korean war. Altogether they are now applied to a hodgepodge of thousands of different goods and services. In fiscal 1965, these taxes are expected to bring the U.S. Treasury $14.5 billion, an important but not decisive part of the Government's estimated income of $98 billion.

Everyone who eats, drinks, smokes, dresses, drives to town or goes out on the town pays the taxes, which generally vary from 5% to 10%. Among the taxed items: household appliances, cameras, sporting goods, autos and auto parts, stock transfers, motor fuel and lubricants, telephone bills, office machines, electric light bulbs, mechanical pencils and ballpoint pens, cabaret tabs, theater and sports admissions. As a means of regulation, as much as a source of revenue, heavy taxes are also slapped on gambling, pinball machines, tobacco and alcohol: $10.50 per gallon of liquor, $9 per barrel of beer, 8-c- per pack of cigarettes.

Businessmen consider the taxes a bother at best, a downright economic dampener at worst--particularly since they are often imposed on top of city or state sales taxes. Though sales in most industries covered by the tax have steadily risen, many businessmen are convinced that expansion would have been much greater without the federal levy. Some industries claim to have been badly hit by the excise. It gets chief blame for the fact that more than 100 leather and luggage manufacturers have gone out of business since 1947 and that the fur industry has suffered a drop in union workers from 13,000 to 7,000 since 1946. Businessmen also complain that collecting the taxes requires extra time and money for which they are not reimbursed: the expense can run from $1 a day for small retailers to the $5,000,000 that American Telephone & Telegraph pays out in collection costs for every $500 million it collects of the 10% tax imposed on telephone calls.

Irritating Inconsistencies. Perhaps the most irritating and confusing aspect of the excise taxes--to seller and buyer alike--is the grand inconsistencies that pepper them. Radio tubes are taxed but not transistors, furs but not knock-'em-dead $3,000 evening dresses, aviation gasoline but not jet fuel. Many items that were initially taxed as luxuries have become the necessities of a newer generation--refrigerators, luggage and telephones, for example.

Some of the excises are sacrosanct, such as those on gas and autos, which are earmarked to pay the costs of federal highway construction. But the move to cut others has developed powerful support. The most talked-about possibility is a reduction of $1 billion to $3 billion that would remove many taxes that have become obsolete. It would probably include, among others, the tariffs on such modern necessities as luggage, telephone calls, toiletries and ballpoint pens.

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