Commodity taxes are taxes on goods. Well-known commodity taxes include those on fuel, liquor, and cigarettes, although in the United States most commodities are taxed in one way or another. We will emphasize the following truths about commodity taxation:
Who ultimately pays the tax does not depend on who writes the check to the government.
Who ultimately pays the tax does depend on the relative elasticities of demand and supply.
Commodity taxation raises revenue and creates deadweight loss (i.e., reduces the gains from trade).