### 2.3 Consumption Taxes

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• Math Help

When you make broad estimates like the one in Example 3, remember that your estimate is only as good as your assumptions. It is a good idea to explicitly write your assumptions down and then to list them whenever you communicate your estimate.

For instance, one of the assumptions is that roughly 20% of adults in the United States smoke cigarettes. If the true percent is closer to 15%, then your final estimate will be roughly one third greater than it should have been.

• Consumer Suggestion

Forty-six states and Washington, DC have increased cigarette tax rates 101 times since 2002. The average state excise tax on a pack of cigarettes is currently \$1.34.

If you're looking for more information on excise taxes, The Tax Foundation lists cigarette, gasoline, and alcohol tax rates by state.

• Checkpoint Solution

The United States uses about 140 billion gallons of gasoline in a year. Federal excise tax is about \$0.18 per gallon and state excise taxes range from \$0.08 to \$0.45. Let's estimate the average to be \$0.45 per gallon (including state and federal).

This means that the total excise tax revenue on gasoline is about

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