Excise taxes on tobacco and alcohol and state sales taxes are often criticized for being regressive. Although everyone pays the same rate regardless of income, why might this be so?

A regressive tax is a tax that disproportionately affects lower-income individuals more than higher-income individuals as a percentage of their income. In other words, it takes a larger percentage of a low-income person's total earnings than a high-income person's earnings. This is the opposite of a progressive tax, which generally takes a larger percentage from high-income earners.

Excise taxes are imposed on the sale or consumption of specific goods, such as tobacco and alcohol. These are indirect taxes, meaning that the tax is initially paid by the producer or seller and eventually passed on to the consumers through the price of the good. As a result, the end consumers ultimately bear the burden of the tax, regardless of their income level.

State sales taxes are taxes levied on the sale of most goods and some services. Similar to excise taxes, state sales taxes are also indirect taxes, as they are initially paid by the seller and passed on to the consumer. As a result, the consumers are responsible for the tax, which is based on the purchased item's price and doesn't take into account their income.

There are several reasons why excise taxes on tobacco, alcohol, and state sales taxes are considered regressive: a. Same tax rate: Both excise taxes and state sales taxes are levied at the same rate for everyone, regardless of the income level. It means that low-income individuals pay the same dollar amount as high-income individuals for purchasing taxed items, making the tax a higher percentage of their income. b. Consumption patterns: Low-income individuals generally spend a larger portion of their income on essential goods and services, which can be subject to state sales taxes or excise taxes. As a result, these taxes may account for a larger percentage of their overall expenditures, compared to high-income individuals who can allocate more of their income towards savings, investments, or untaxed luxury goods. c. Inelastic demand: The demand for products like tobacco and alcohol is relatively inelastic, meaning that consumers will buy these products despite price increases due to taxes. Since low-income individuals often have limited options to substitute these products with untaxed alternatives, they are more susceptible to bear a heavier burden of these taxes in comparison to high-income individuals.

Excise taxes on tobacco and alcohol and state sales taxes are often criticized for being regressive because they take a larger percentage of income from low-income individuals compared to high-income individuals. These taxes are based on the price of goods and applied uniformly to all consumers, regardless of their income. The consumption patterns and inelastic demand for specific goods lead to a disproportionate burden on low-income consumers, making these taxes regressive in nature.