Paul Brandus: The next battleground in the gun debate may be taxes

I’ve mentioned before—and I say this as a guy who’s pro guns and supports the Second Amendment—that demographics and changing consumer behavior are slowly nibbling away at America’s rich gun culture. I believe that we have seen the high-water mark for that culture and it is slowly receding. I emphasize slowly.

Earlier column: Guns are on the same path to oblivion as cigarettes, soda

This has less to do with who’s in Congress and how much cash the National Rifle Association is stuffing in lawmaker’s pockets—and more to do with something that is harder to see: the fact that the gun base in the United States skews 1) male, 2) white, 3) rural and 4) somewhat lesser educated—all trends that run counter to an America that is 1) majority female, 2) rapidly urbanizing, 3) more educated and 4) less white (white births are now a minority of all U.S. births) than ever before. Data on these evolving trends can be found in the recent “demographics of gun ownership” study by the Pew Research Center, a nonpartisan organization based here in Washington.

As these changing demographics and consumer habits gradually erode the still-powerful gun culture, its political base is likely to erode as well. Like water running downhill, this is the natural order of things. And if you take this reality and layer it on top of another one—namely, the ongoing fiscal pressure that states and cities across the country constantly face—it suggests that guns and ammunition could be increasingly seen as an undertapped source of revenue.

There are precedents for this. Tobacco, a ubiquitous product half-a-century ago, gradually became politically easier to target and tax as demographics and changing consumption patterns gradually weakened a once all–powerful and unassailable industry.

This culminated in a massive 1998 agreement between tobacco manufacturers and 46 states, five U.S. territories and the District of Columbia, in which the industry agreed to pay billions of dollars a year to those jurisdictions. Those costs were generally just passed on to the declining number of Americans who smoke, which helps explain why cigarette taxes are always going up. This revenue is addictive as nicotine to states, which need every penny they can get; Of course, all this is on top of the current federal tax of $1.00 per 20-pack of cigarettes.

This isn’t to say that the firearms industry isn’t taxed already. Of course it is. But taxes generally haven’t budged in a long time, and are narrowly applied. There’s a federal excise tax of 10% on handguns and 11% on long guns for the import and production of firearms and ammunition—but this hasn’t changed since the tax was first implemented literally a century ago, in 1919. And you may be surprised to know that only two states, per a RAND Corp. analysis, impose special taxes on guns and ammo above and beyond standard sales taxes: Pennsylvania and Tennessee. The former tacks on a $3 surcharge on firearms, while the latter has a $0.10 tax for use, possession, and sales of shotgun shells of metallic cartridges.

Also read: Buffett just offered a simple explanation why Berkshire Hathaway still invests in gun stocks

That consumption taxes for guns and ammo (beyond normal sales taxes) are generally rare reflects two forces: the political base for the industry remains solid, and basic economics. If taxes were raised, an individual could theoretically just drive to a cheaper state or jurisdiction to make a purchase. But logic has limits: How far would someone be willing to drive, how much time and gas would they be willing to spend just to save a few bucks?

But most states do tax gun owners in other ways that can’t be avoided as easily: through licensing and permit fees. Everything from safety classes to concealed carry permits is taxed at varying rates and permit lengths—a steady source of revenue. It’s politically easier to raise revenue this way, which is why most states do; these fees are likely to keep inching up in the years ahead. Certainly this will be the case in blue states.

Some gun owners say such taxes are an infringement upon their Second Amendment rights. Defenders claim that like tobacco and alcohol, guns can sometimes incur broader costs upon society and therefore must be paid for through usage and consumption fees. Both points of view have merit; this often acrimonious debate will never end.

Meantime, RAND economist Rosanna Smart says here’s where the above-mentioned changes in demographics come into play. “As the people who want stricter regulations start to dominate the population, they can get more of these laws or tax changes passed,” she says. “It becomes more politically feasible.” She speculates that higher taxes on ammunition are probably more likely over the long run, given that “firearms are durable,” whereas ammunition needs to be purchased on a somewhat steady basis. “You could obtain more revenue by taxing that item.”

Those changing demographics—and evolving consumer attitudes—are upping the pressure on the industry in key ways. In March, Remington, the legendary manufacturer of guns and ammunition, filed for bankruptcy protection. The company—founded in 1816—cited falling sales, heavy debt and lawsuits tied to the 2012 massacre at Sandy Hook elementary school in Connecticut.

They are also driving changes across much of the corporate landscape. Retailers are reducing sales channels for guns—just one major retailer now sells the kind of semi-automatic assault-style rifles that have been used in so many mass shootings: Bass Pro Shops, which now owns another fishing and hunting retailer, Cabela’s. Walmart WMT, +1.05%  , by far the nation’s biggest retailer, stopped doing so three years ago. Retailers—with their eye always on the bottom line—make data-driven decisions each day on what to sell and are always adjusting their inventory. There’s nothing in the Constitution that says businesses have to sell anything to anyone.

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