Luxury Taxes

A luxury tax is an excise levy on goods or services considered to be luxuries rather than necessities. If luxuries are consumed conspicuously with the intention to gain social status by distinction, one can call them status goods. The taxation of status goods has a long tradition. Historical examples are taxes on servants, drapes, hair powder, or windows in the late-eighteenth and early nineteenth century in England or Holland. Modern examples can be found in the United States, where luxury taxes were introduced on expensive cars, boats, aircrafts, jewelry, and furs in the late-twentieth century.

[Page 878]Generally, goods can be taxed for several reasons: taxes are levied on goods for fiscal reasons to finance governmental activities, such as defense, infrastructure, and social redistribution. This is not ...