Starting in July, California will become the first U.S. state to impose an excise tax on guns and ammunition. The new tax, which would be an 11% levy on each sale, would be on top of the 10% or 11% federal sales tax on firearms and the 6% California sales tax.
The National Rifle Association characterizes the law authorizing this new tax, the Gun Violence Prevention and School Safety Act, as an affront to the Constitution. But the reaction from gun control groups and gun manufacturers may suggest otherwise. That's the impact this measure aimed at reducing gun violence will have on sales.
One way to think about the impact of this law is to compare state tax policies for firearms with those for alcohol and tobacco products. It's not for nothing that they're all called the Bureau of Alcohol, Tobacco, Firearms and Explosives. ATF focuses on these products because, while legal, they can pose serious harm to society, such as drunk driving and cancer-causing addiction. They also have a common history. All are connected to criminal organizations seeking to profit from the illegal market.
Therefore, alcohol and tobacco products are generally subject to state excise taxes. This type of tax makes certain products more expensive so that people buy less of them, reducing harm to society, while theoretically still offsetting the harm they cause. It generates tax revenue that can be used by the state.
For example, California charges an excise tax of $2.87 per pack of cigarettes. Its taxes are higher than the national average, but much lower than New York state's tax rate of $5.35. California also imposed a 12.5% ​​e-cigarette excise tax in 2021.
Of the four ATF product families, firearms are not subject to state excise taxes. until now.
Anti-gun advocates and policy analysts have long called for the gun industry to be taxed in the same way as alcohol and tobacco, given the harm they cause. The national gun homicide rate in 2021 was 4.5 per 100,000 people, eight times higher than Canada and 77 times higher than Germany. That translates into 13,000 lives lost each year.
Additionally, nearly 25,000 Americans die by suicide by firearm each year. Additionally, more people suffer non-fatal firearm injuries than die from firearms, according to the Centers for Disease Control and Prevention.
Gun deaths and injuries are not only tragic, but costly. One economist estimated the benefit-to-cost ratio for the U.S. firearms industry in 2009 to be approximately 0.65. This means that for every 65 cents the firearms industry generates in the economy, the firearms industry generates $1 in costs. And that calculation does not include the cost of non-fatal injuries in the United States or firearm harm caused abroad by weapons sold by the United States.
Gun sales in the United States have increased tenfold over the past two decades to about 20 million guns a year, and they are now more lethal and expensive than ever before. The state of California is thorough in its taxation.
And how much will that tax be? There is an argument that firearms should be taxed at a higher level than alcohol and tobacco, which are consumable goods that disappear quickly after use. The gun will remain forever. These can accumulate and continue to cost you long after the initial sale.
When the new law goes into effect in July, California will tax firearms almost at the same level as alcohol. However, the state would need to apply an additional 26% excise tax to equal the effective tax on cigarettes.
It's unclear what impact the new tax will have on gun violence. In theory, it should be very effective. In 2023, my colleagues and I modeled the US firearms market and determined that for every 1% increase in price, demand would decrease by 2.6%. This means that the market needs to be very sensitive to tax increases.
Using these numbers, another colleague recently estimated that California's excise tax would reduce gun sales by 30% to 44%. If the tax were applied nationwide, it could increase government revenue by an additional $1.5 billion to $1.9 billion.
But problems may come from surrounding states. It's already easy to illegally transport guns purchased in Nevada, where laws are lax, to California. However, there is some evidence to suggest that our state's new policies will not be neutralized by our neighbors.
After the federal assault weapons ban expired in 2004, making AR- and AK-style rifles much easier to purchase in much of the United States, gun homicides in Mexico skyrocketed. The exception is Baja California, Mexico, just across the border from California, which maintains a state-level assault weapons ban, according to two studies.
The gun seizures in Mexico show that all four U.S. states that border Mexico are among the top five sources of guns sold to Mexico by the United States. However, California's contribution is 75% less than its population, and its proximity suggests it should be.
So California's law already appears to be effective in reducing gun violence. A sales tax could accomplish much more. If that happens, other states might follow California's lead and work to reduce gun violence by attacking gun manufacturers where they care most: bank accounts.
Topher L. McDougall is a professor of economic development and peacebuilding at the University of San Diego. This article was produced in partnership with The Conversation.
