The statutory incidence of an excise tax of $50 dollars is placed on the seller of a good but the actual incidence of the tax falls primarily on the consumer of the good. Answer the following: 1. Explain why the consumer is paying the larger portion of the excise tax. 2. What is the anticipated impact on the firm's total revenue?
Excise tax is defined as the tax that is imposed on specific goods or services like, fuel, tobacco and alcohol. These are the international taxes that is imposed within the government infrastructure instead of across the borders of the country. Federal excise taxes are collected from fuel sales, airline tickets, tobacco along with other goods and services. Excise taxes can be both ad valorem, paid by percentage, or specific, which is paid as a cost charged by unit. These taxes are imposed on goods having a very high social cost. The federal excise tax imposed on the alcohol at the manufacturing and import levels, on the basis of the production per unit or importing of alcohol, like, distilled spirits, wine, and beer for selling in the market.
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