Question

The Bureau of Labor Statistics' Consumer Expenditure Survey: 2007 gives the following data: Income Category Average Income Alcoholic Beverage Tobacco Products of Family before Taxes ($) Expenditures ($) Expenditures ($) First quintile 10,531 176 259 Second quintile 27,674 272 337 Third quintile 46,213 413 381 Fourth quintile 72,460 506 371 Highest quintile 158,388 917 268 Analyze the likely vertical equity of selective excises on alcoholic beverages and tobacco products.

Answer 1

Income Category of Family	Average Income before Taxes ($)	Alcoholic Beverage Expenditures ($)	Tobacco Products Expenditures ($)	Alcoholic Beverage	Tobacco Products
First quintile	10,531	176	259	1.67%	2.46%
Second quintile	27,674	272	337	0.98%	1.22%
Third quintile	46,213	413	381	0.89%	0.82%
Fourth quintile	72,460	506	371	0.70%	0.51%
Highest quintile	158,388	917	268	0.58%	0.17%

As can be seen, as the average income before taxes rises, the percentages go down.

This seems to be a case of significantly regressive taxation for both