Down the road, however, states may have to consider tax increases to offset impending cuts in federal aid. It's likely they will take an early look at excise taxes. Broad-based taxes, like the personal income tax, the property tax, and the retail sales tax, are hard to raise because they are so visible. People are reminded of them every time they open a paycheck, buy a big-ticket item, or receive a property tax bill.
Excises have considerable appeal.
Motor fuel tax revenues are generally earmarked for the construction, maintenance, and operation of highways, thus benefiting the drivers who pay the tax. Asa result, inflation-adjusted revenues tend to erode over time unless the tax rate is increased periodically. The share of total state tax collections from excise taxes has declined inmost New England states over the last ten years. This shrinkage is attributable to excise taxes' lack of sensitivity to inflation, changes in patterns of consumption, and, in the case of the tax on motor fuels, sluggish economic growth. Gasoline Taxes Motor fuel taxes have generally been the most lucrative of the excises because motor fuel is a large tax base and tax rate increases have been frequent.