Lifetime Incidence and the Distributional Burden of Excise Taxes

Abstract

Lifetime income is less variable than annual household income, since the latter reflects transitoty shocks to wages, family status, and employment.This implies that low-income households in one year have some chance of being higher-income households in other years, and significantly affects the estimated distributional burden of excise taxes.This paper shows that household expenditures on gasoline, alcohol, and tobacco as a share of total consumption (a proxy for lifetime income) are much more equally distributed than expenditures as a share of annusl income.From a longer-horizon perspective, excise taxes on these goods are therefore much less regressive than standard analyses suggest.

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