By Topher L. McDougal
Starting in July 2024, California will be the first state to charge an excise tax on guns and ammunition. The new tax – an 11% levy on each sale – will come on top of federal excise taxes of 10% or 11% for firearms and California’s 6% sales tax.
The National Rifle Association has characterized California’s Gun Violence Prevention and School Safety Act as an affront to the Constitution. But the reaction from the gun lobby and firearms manufactures may hint at something else: the impact that the measure, which is aimed at reducing gun violence, may have on sales.
As a professor who studies the economics of violence and illicit trades at the University of San Diego’s Kroc School of Peace Studies, I think this law could have important ramifications.
One way to think about it is to compare state tax policies on firearms with those on alcohol and tobacco products. It’s not for nothing that these all appear in the name of the Bureau of Alcohol, Tobacco, Firearms and Explosives, also known as ATF.
What alcohol, tobacco and firearms have in common
That agency, part of the Justice Department, is tasked with making American communities safer. The ATF focuses on those products because, while legal, they can cause significant harm to society – in the form of drunken driving, for example, or cancer-causing addictions. They also have a common history: All have been associated with criminal organizations seeking to profit from illicit markets.
Alcohol and tobacco products are thus usually subject to state excise taxes. This policy is known as a “Pigouvian tax,” named after 20th-century British economist Arthur Pigou. By making a given product more expensive, such a tax leads people to buy less of it, reducing the harm to society while generating tax revenue that the state can theoretically use to offset those harms that still accrue.
California, for instance, imposes a US$2.87 excise tax on each pack of cigarettes. That tax is higher than the national average but much lower than New York’s $5.35 levy. California also imposed a vaping excise tax of 12.5% in 2021.
Of the three ATF product families, firearms have enjoyed an exemption from California excise taxes. Until now.
The costs of gun violence
Anti-gun advocates have long called for the firearm industry to lose the special treatment it receives, given the harms that firearms cause. The national rate of gun homicides in 2021 was 4.5 per 100,000 people. This is eight times higher than Canada’s rate and 77 times that of Germany. It translates into 13,000 lives lost every year in the U.S.
Additionally, nearly 25,000 Americans die from firearms suicide each year. This implies a rate of 8.1 per 100,000 per year, exceeding Canada’s by more than four times. Moreover, more people suffer nonfatal firearm injuries than die by guns.
Gun deaths and injuries aren’t just tragic – they’re expensive, too. One economist estimated the benefit-cost ratio of the U.S. firearms industry at roughly 0.65 in 2009. That means for every 65 cents it generates for the economy, the industry produces $1 of costs.
And that back-of-the-envelope calculation may be an underestimate. It included the cost of fatal gun violence committed within the U.S. But the estimate didn’t include nonfatal injuries, or the cost of firearm harms occurring outside the U.S. with U.S.-sold weapons.
Mexico pays a steep price for US gun trade
America has been called the world’s gun store. No country knows this better than Mexico. The U.S. endured roughly 45,000 firearms deaths in 2019, while the rest of the world combined saw 200,000. Mexico, which shares a long, permeable border with the U.S., contributed 34,000 to that grisly total.
Mexico’s government estimates that 70% to 90% of traceable guns used in crimes seized in the country come from the United States. Other examples abound. For instance, U.S.-sold guns fuel gang violence in a lawless Haiti.
No investor would back such an industry if they were forced to pay its full cost to society. Yet U.S. gun sales have grown tenfold over the past 20 years to about 20 million guns annually, even though they’re now deadlier and more expensive.
What alcohol, tobacco and firearms don’t have in common
Across the U.S., there’s not a single state where firearms are taxed as much as alcohol and tobacco. I think guns should probably be taxed at a higher level than both of them. That’s because unlike alcohol and tobacco – consumable products that disappear as soon as they’ve been used – firearms stick around. They accumulate and can continue to impose costs long after they’re first sold.
Starting in July, California will tax firearms at about the level of alcohol. But the state would have to apply an excise tax of an additional 26% to equal its effective tax on tobacco.
It’s unclear how the new tax will affect gun violence. In theory, the tax should be highly effective. In 2023, some colleagues and I modeled the U.S. market for firearms and determined that for every 1% increase in price, demand decreases by 2.6%. This means that the market should be very sensitive to tax increases.
Using these estimates, another colleague recently estimated that the California excise tax would reduce gun sales by 30% to 44%. If applied across the country, the tax could generate an additional $1.5 billion to $1.9 billion in government revenue.
One possible problem will come from surrounding states: It’s already easy to illegally transport guns bought in Nevada, where laws are more lax, to the Golden State.
But there’s some evidence that suggests California’s stringent policies won’t be neutralized by its neighbors.
When the federal assault weapons ban expired in 2004, making it much easier to buy AR- and AK-style rifles across much of the U.S., gun murders across the border in Mexico skyrocketed. Two studies show the exception was the Mexican state of Baja California, right across the border with California, which had kept its state-level assault weapons ban in place.
Gun seizures in Mexico show that all four U.S. states bordering Mexico rank in the top five state sources of U.S.-sold guns in Mexico. But California contributes 75% less than its population and proximity would suggest.
So, California laws seem to already be making a difference in reducing gun violence. I believe the excise tax could accomplish still more. Other states struggling against the rising tide of guns will be watching closely.
Topher L. McDougal is Professor of Economic Development and Peacebuilding at the University of San Diego.
Shelly says
Diminish violence? That’s a joke, right? Chicago has one of the strictest gun laws, did their violence Diminish? I hope they’re going to apply that 11% tax to the criminals that buy guns illegally off the black market.
JimboXYZ says
More inflation & gouging in California. Everything else in California is so unaffordable, why not tax the crap out of home & self defense too. The criminals have illegal drug money funding their gun purchases. Raising taxes on guns & ammo, inflation on everything else will rise to pay for the 11% tax. Gavin Newsom needed to be removed back for the recall. Unfortunately, the State is still so lopsided & overrun with Democrats that there is no hope for a better life there beyond being a celebrity of that lottery for the masses.
Deborah Coffey says
Good idea. Now, add a registration fee of $1200/year and it will do even more good.
Hippy says
Liberal logic at work again…… what an utter fail.
feddy says
Right because the criminals who obtained their firearms did it legally.
JW says
Or, let’s do what America does with China: a tariff of 100% on EV’s. We can do it here on guns and ammunition! Ha ha.
oldtimer says
Do you believe criminals will register their guns?
DaleL says
I believe you are confusing the total amount of violence without taking into consideration the population. Because Chicago has such a large population, the total amount of violent crime is greater than a city with a smaller population. A better comparison is the violent crime rate per capita (person). By this measure, Chicago is far down the list. St. Louis, MO (2,082), Detroit, MI (2,057), Baltimore, MD (2,027), and Memphis, TN (2,003) all have twice the rate of violent crime compared with Chicago (1099 violent crime incidents per 100,000 people in 2018).
I’m hoping they will use the 11% tax to add more security to schools, places of worship, parks, and government buildings.
DaleL says
I am generally in favor of “use” taxes. If the 11% tax is to be used for firearms related purposes, then I could find it to be acceptable. The tax money should be funneled into increasing safety at schools, public locations (parks), and providing firearms training. The tax money should not be just added to the California general fund.
Governments, both Republican and Democrat controlled, are famous for diverting funds raised for one purpose to something completely different.
Pogo says
@The ammo box is the problem
…the ballot box is the solution.
Decide. Then do.
Kevin says
We know exactly why Chicago has a large gun violence statistic. This tax will do absolutely nothing to stop the crime in California. Go after the drugs, go after the gangs. This is only punishing law abiding citizens. Criminals don’t care about a tax increase. Just another useless tax, but that’s liberal thinking. No surprise.
Stacy Norton says
Pure theft
Jim says
Oh, where to start….. JimboXYZ, you might want to check your facts out before pontificating on any subject. (Hey, try it, you might like it….)
Most criminals do not purchase their firearms through licensed gun dealers. That’s because they don’t want the gun(s) traced back to them. So the criminals will spend their illegal drug money on stolen and/or straw purchased guns.
I guess you are just peachy with the current situation of gun violence here and in other countries (as outlined in this article). I would expect that from you. I’m a gun owner myself and I think we need to find ways to reduce gun violence. I don’t know if this California initiative will have any real effect but it’s worth a try and it’s certainly better than doing nothing.
But you are right, Democrats are more prone to do something about gun violence than Republicans. I always look forward to all the “thoughts and prayers” that Republican lawmakers solemnly state after some more kids get shot up at a school. That always makes me feel better about the situation.
You keep giving us your thoughts on these subjects. I enjoy seeing how stupid and inhuman you can go. And, please, take an English class! Every third sentence you write is incomprehensible as well as ignorant. I sure hope you don’t have a GED! If so, the school system you are a product of should be shut down until the teachers and admin know how to teach and grade! I think you were just “passed along” from grade to grade….
jake says
Right, let’s screw the honest gun owner. You are so predictable.
Deborah Coffey says
Not everyone is a criminal. Should we do nothing and just continually watch our relatives die from gun violence? Oh, you haven’t lost anyone yet? Well, you probably will.
Sherry says
@jimbo. . . As someone who actually moved from fear and hate filled Florida to wonderful Sausalito, CA. . . I can easily say . . . “as usual”, you have zero idea what you are spouting off about! Our life, among the “educated, kind, friendly people” here is heaven! Although Florida is the state where we were born, we would never ever move back to that completely toxic society! Florida, a state that is becoming more and more fascist every day! The state where literacy, and scientific fact went to die!
LOL! Sounds perfect for you jimbo!
jake says
@jim
No one died and made you King. You expressed your opinion, and disagreed with another commentator, which occurs here often. But to attack someone personally, hatefully, by demeaning them, is reprehensible.
Sherry says
This from the Harvard Injury Control Research Center:
Homicide
1. Where there are more guns there is more homicide (literature review)
Our review of the academic literature found that a broad array of evidence indicates that gun availability is a risk factor for homicide, both in the United States and across high-income countries. Case-control studies, ecological time-series and cross-sectional studies indicate that in homes, cities, states and regions in the U.S., where there are more guns, both men and women are at a higher risk for homicide, particularly firearm homicide.
Hepburn, Lisa; Hemenway, David. Firearm availability and homicide: A review of the literature. Aggression and Violent Behavior: A Review Journal. 2004; 9:417-40.
2. Across high-income nations, more guns = more homicide
We analyzed the relationship between homicide and gun availability using data from 26 developed countries from the early 1990s. We found that across developed countries, where guns are more available, there are more homicides. These results often hold even when the United States is excluded.
Hemenway, David; Miller, Matthew. Firearm availability and homicide rates across 26 high income countries. Journal of Trauma. 2000; 49:985-88.
Sherry says
This From the Scientific American:
Most of this research—and there have been several dozen peer-reviewed studies—punctures the idea that guns stop violence. In a 2015 study using data from the FBI and the Centers for Disease Control and Prevention, for example, researchers at Boston Children’s Hospital and Harvard University reported that firearm assaults were 6.8 times more common in the states with the most guns versus those with the least. Also in 2015 a combined analysis of 15 different studies found that people who had access to firearms at home were nearly twice as likely to be murdered as people who did not.
Sherry says
Yes, I know that the FOX, fear filled, indoctrinated MAGA cult members have no use for scientific analysis of factual data, but I thought I would put some facts out there just in case someone may be struggling to take their thinking power back. We can only hope!
Personally, I would be fine with much higher fees for “ALL” gun owners across the entire US, along with mandatory universal background checks, a minimum age of 21, and a 10 day waiting period. I also support complete bans, for civilians, on any automatic or semi- automatic gun of any kind, from any source. Our society has really gone to the “dark side” when we can’t even ban weapons of mass destruction!
Blade says
And yet the CDC estimates that there are up to 2.5 million defensive gun uses every year. Go figure.