Local government pumped up excise taxes during the recession, according to a PPI new brief, "In Slump, Localities Resort to Excise Taxes". Excluding gasoline and tobacco, local excise tax revenues rose by 5.2% from 2007 to 2009, even as consumers spent less.
Why does this matter? In addition to being regressive, excise taxes could have bad implications for local economies if relied on too much, says PPI Economists Diana G. Carew. Higher excise taxes may be self-defeating if they force businesses to close or move away, hurting key sectors of the local economy.
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President, Progressive Policy Institute