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This paper studies the roles of market power and taxes in determining market surplus and social welfare in the U.S. consumer firearms industry. We construct a dataset combining the prices and characteristics of firearms available to consumers, microdata on firearm transactions from Massachusetts, and aggregate purchase quantities from other states. We account for price endogeneity by constructing an instrument based on heterogeneous exposure to aggregate shocks in the costs of commodity metals, and estimate an own-price elasticity of -2.5 for the average firearm model. Using this data and variation, we estimate a model of national supply and demand for consumer firearms. Although firearm manufacturers charge markups which reduce quantity, a calibrated measure of public health costs implies that the equilibrium quantity of firearm purchases is still inefficiently high. Moreover, we find that the profit-maximizing markups across products do not equate equilibrium prices with the net social costs of firearm sales, creating scope for regulatory intervention. As such, we consider the redesign of a longstanding federal firearms tax, subject to a constraint that firearm consumers are not harmed. We show that a simple tax redesign leads manufacturers to set prices better-targeted towards social welfare, holding constant consumer surplus and industry profits, while improving public health. The distributional implications of this tax redesign suggest that it is politically feasible.