100 



MULTIPLE PURPOSE RIVER DEVELOPMENT 



TABLE 8. Excise Taxes and Income Elasticities for Selected 

 Goods and Services 



Commodity 



Tax revenue 

 ($ million) 



Per cent of Income elasticity 



Musical instruments and radios . . 248 



Records 8 



Appliances 107 



Cameras 15 



Jewelry 142 



Furs 27 



Toiletries 72 



Luggage 51 



Admissions 189 



Telephone 520 



Transportation 632 



Average elasticity 



1.15 



1.00 



" U. S. Treasury Department, Treasury Bulletin, March 1956. Figures are for 

 fiscal 1955. 



■^ U. S. Department of Commerce, "Consumer Expenditure Patterns," Survey 

 of Current Business, September 1955, pp. 23-32. These estimates are based on 

 time series analysis and are of questionable statistical validity in view of the 

 small number of observations and the strong trends in some of the series. But 

 the similarity of the results for the average of the two periods offers considerable 

 evidence that the actual value is not far removed from 1.0. It may appear puz- 

 zling that these luxuries do not have a higher elasticity; but the result can be 

 explained by the wide range of goods and prices offered in each category. 



estimate very close to 1.0, which implies an incidence of the taxes 

 among income classes similar to the distribution of income. ^^ 



Table 9 shows the distribution of family income and the interest 

 rates applicable to the tax saving in each class. Averaging the 

 rates by using the income distribution as weights, gives us the 



" Rolph has put forth the view that factors of production bear the cost of 

 excise taxes through backward shifting. Our computation is consistent with this 

 assumption if the changes in factor payment are proportional, for this will 

 distribute the tax saving among income classes in accordance with the distribu- 

 tion of income. See E. R. Rolph, "A Proposed Revision of Excise Tax Theory," 

 Journal of Political Economy, April 1952, pp. 102-17. 



