Consumption taxes are the various taxes imposed on the purchase of goods and SERVICES. Sales, excise, and valueadded tax (VAT) are the most common types of consumption taxes, with sales taxes being the most visible type. Many international visitors are shocked the first time a tax is added to the price of the PRODUCT they are purchasing. Americans, however, generally support the use of sales taxes over other forms of taxation, rationalizing that “everyone has to pay it” and “you only have to pay a little at a time.” In the United States, sales taxes are commonly imposed by state and sometimes local governments, so sales-tax rates vary around the country. In addition, many states exempt certain categories of goods, usually food and clothing, from sales taxes. A major controversy has arisen regarding whether to require E-COMMERCE businesses to collect and remit sales taxes. Presidents Bill Clinton and George W. Bush have both delayed implementation of INTERNET commerce sales taxation. Supporters argue taxation would discourage growth of this new industry, while opponents, including many state treasurers and retail “brick-and-mortar” companies, complain it reduces tax revenue and gives an unfair advantage to Internet-based companies. Generally excise taxes which usually comprise a fixed amount per unit of a good, are imposed by the federal government. The federal excise tax on gasoline is charged in the form of cents per gallon. Excise taxes on liquor and cigarettes are similarly based on cents per gallon and cents per pack, respectively. Government agencies rarely collect consumption taxes directly. Instead, sales and excise taxes are typically collected by retailers and remitted to the respective government treasuries. Excise taxes are sometimes used to implement the benefits principle in government policy: the idea that those citizens who benefit from the government program or service should pay for it, while those citizens who do not utilize the program or service should not have to pay for it. The excise tax on gasoline, which is directed into the national highway TRUST fund for building and maintaining roadways, is an example of an excise tax based on the benefits principle. Excise taxes are also sometimes called “sin and vice” taxes and are imposed to discourage CONSUMPTION of certain products. Higher excise taxes increase the price of products, and, given the law of DEMAND and ELASTICITY OF DEMAND, a higher price will have a major or minor impact on quantity demanded. The United States, unlike Canada and most of Europe, does not have a value-added tax (VAT). Many economists argue a VAT would be preferable to the myriad of income taxes currently used in the country. In a VAT system, goods are taxed at each stage of the production process with the tax incorporated as part of the cost to producers. For example, farmers produce wheat, which is sold to flour companies. The difference between the revenue from the sale and cost of seed, fertilizer, and other inputs the farmer used is the farmer’s value added; this would then be taxed. Next, the flour company would take the wheat, convert it into flour, and sell it to a bread company. The difference between the cost of the wheat plus other inputs and the INCOME received from the bread company would be the flour company’s value added, and the VAT would be applied. The bread company would pay a VAT based on their value added, and it would be incorporated in the price consumers would pay. Economists argue a VAT would discourage consumption and therefore encourage savings. Savings provide funds for investment, which in turn increases a country’s, CAPITAL resources, expanding its production capacity. Economists point to the current income-tax system as having almost infinite numbers of loopholes and discouraging productive activity through higher tax rates as peoples’ incomes increase. Economists also recognize consumption taxes are regressive. Lower-income consumers typically spend a higher percentage of their income on sales-taxable items than upper-income consumers do, and therefore they pay a higher percentage of their income in the form of sales taxes.