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Taxing Alcohol

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Taxing Sin

Abstract

Alcohol is said to impose harms, including healthcare costs and impaired driving, that warrant an alcoholic beverage tax. However, research shows that light and moderate alcohol consumption is beneficial to health. Furthermore, the burden tied to heavy drinking are exaggerated and, when all costs and benefits are considered, may not exist. Research also suggests that alcohol taxes are self-defeating; those who are likely to drink less because of higher prices are the same light and moderate drinkers whose health improves after they drink. Heavy drinkers, by contrast, are not that responsive to higher prices. But policymakers are not likely to repeal alcohol taxes. Too many experts testify to their necessity and too many special interest groups agree, all while receiving government grants.

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Notes

  1. 1.

    Liu et al. (2018); see also Forsyth (2017) and Phillips (2014).

  2. 2.

    Reliance on alcohol taxes was also a practical matter. Before it was commonplace to work in exchange for a wage, an income tax was not a useful source of revenue. The same could not be said about an alcohol tax.

  3. 3.

    Hodgeland (2015) and Hu (1950).

  4. 4.

    McGirr (2019) notes that racial and anti-immigrant undertones also marked the temperance movement, just as it marked campaigns against marijuana.

  5. 5.

    Fosdick and Scott (1933).

  6. 6.

    Joint Committee of the States to Study Alcoholic Beverage Laws (1950).

  7. 7.

    The press release, “Harmful Use of Alcohol Kills More Than 3 Million People Each Year, most of them Men,” was issued September 21, 2018.

  8. 8.

    See Policy Number 20041, “Reducing Underage Alcohol Consumption,” and Policy Number 8613, “Alcohol Tax Policy Reform.”

  9. 9.

    Sornpaisarn et al. (2017).

  10. 10.

    Cook (2007).

  11. 11.

    Looney (2017).

  12. 12.

    Teutsch et al. (2018).

  13. 13.

    The report, “Reducing Underage Drinking: A Collective Responsibility,” was issued by the National Research Council and the Institute of Medicine of the National Academies in 2003. It recommended alcohol tax increases, especially on beer.

  14. 14.

    For example, Alcohol Change UK issued a press release in October 2017 announcing the group’s support for minimum pricing in Wales that “will improve health and save lives.”

  15. 15.

    See illustration on page 170 of Thom (2017).

  16. 16.

    Callinan et al. (2014) and Li et al. (2017).

  17. 17.

    For a general discussion, see Chaloupka et al. (2002).

  18. 18.

    Bates et al. (2015), Bouchery et al. (2011), Cesur and Kelly (2014), Herrnstadt et al. (2015), Manning et al. (1989), Pogue and Sgontz (1989), Stahre et al. (2014), and Sacks et al. (2015).

  19. 19.

    Authors (2018) and Burton and Sheron (2018).

  20. 20.

    Blanchette et al. (2019).

  21. 21.

    Stockwell et al. (2016).

  22. 22.

    Ronksley et al. (2011); see also Corrao et al. (2000) and Di Castelnuovo et al. (2006).

  23. 23.

    Dasgupta (2019) and Kim et al. (2020); see also van den Brandt and Brandts (2020).

  24. 24.

    Brien et al. (2011).

  25. 25.

    Authors (2015), de Lorgeril et al. (2002), Fragopoulou et al. (2018), and Romeo et al. (2007).

  26. 26.

    Wagner (1997) and Woodfield (1988).

  27. 27.

    Wagner (1997); see also Crampton et al. (2011).

  28. 28.

    Gant and Ekelund (1997), Heien and Pittman (1989), and Stringham (2009).

  29. 29.

    Sacks et al. (2015).

  30. 30.

    Bourne (2019).

  31. 31.

    Dave and Kaestner (2002), Chaloupka et al. (2019), Jarl and Gerdtham (2010), Jones and Richmond (2006), MacDonald and Shields (2004), and Peters (2004).

  32. 32.

    Auld (2005), Heien (1996a, b), and van Ours (2004); see also Peters and Stringham (2006).

  33. 33.

    Bouchery et al. (2011); see also Stringham (2009).

  34. 34.

    While arguing that the pension impact would be minor, Horlings and Scoggins (2006) note that it is understudied. See also Meltzer (1997).

  35. 35.

    Heise (2010) and Polen et al. (2001).

  36. 36.

    See Møller and Matic (2010). Although the authors argue that all costs and benefits should be considered, they go to great lengths to explain how difficult the benefits are to estimate.

  37. 37.

    According to the National Highway Traffic Safety Administration, an impaired driving accident is one in which the driver has a blood alcohol concentration above 0.08.

  38. 38.

    See Centers for Disease Control and Prevention National Vital Statistics Reports, Volume 68, Number 6, and the same agency’s “Impaired Driving: Get the Facts” issued in June 2019.

  39. 39.

    The Centers for Disease Control and Prevention reported 10,497 deaths in 2016 from motor vehicle accidents where alcohol was a factor; estimates of medical error-induced mortality are discussed in Makary and Daniel (2016).

  40. 40.

    Ramnath et al. (2020).

  41. 41.

    National Highway Traffic Safety Administration (2018).

  42. 42.

    Wagenaar et al. (2009).

  43. 43.

    Wagenaar et al. (2010).

  44. 44.

    Lhachimi et al. (2012).

  45. 45.

    Cobiac et al. (2009).

  46. 46.

    Keyes et al. (2019).

  47. 47.

    It should be noted that some methodologies (e.g., the Sheffield Alcohol Policy Model) have attempted to incorporate more dynamic modeling.

  48. 48.

    Nelson and McNall (2016).

  49. 49.

    Nelson (2013); see also Manning et al. (1995).

  50. 50.

    Ayyagari et al. (2013).

  51. 51.

    Quoted from Dee (1999); see also Mast et al. (1999), Nelson (2014b), and Young and Likens (2000).

  52. 52.

    Ajilore et al. (2016) and Guo et al. (2015).

  53. 53.

    Alley et al. (2020).

  54. 54.

    Ruhm et al. (2012). The data set in question is the Council for Community and Economic Research’s ACCRA Cost of Living Index.

  55. 55.

    Wagenaar et al. (2015).

  56. 56.

    McClelland and Iselin (2017).

  57. 57.

    Beard et al. (1997), Beatty et al. (2009), and Stehr (2007).

  58. 58.

    Gant and Ekelund (1997).

  59. 59.

    Esser et al. (2016).

  60. 60.

    For example, Subbaraman et al. (2020) report that alcohol taxes reduce beer consumption, but also concede that they failed to control for “laws related to drunk-driving, such as blood alcohol content limits and license revocation policies.”

  61. 61.

    Benson et al. (1999) and Mast et al. (1999).

  62. 62.

    The report is titled, “Economic Costs of Alcohol and Drug Abuse in the United States—1992.”

  63. 63.

    The study in question is Chaloupka et al. (1993); see discussion in Benson et al. (1999). Dee (1999) also reports that including fixed effects eliminates taxes’ statistical significance.

  64. 64.

    Almendrala (2018).

  65. 65.

    McCambridge and Hartwell (2015). The authors note there may be some bias with respect to the relationship between alcohol consumption and stroke, but there were too few studies to make a definitive conclusion one way or the other. One of the authors of that paper later argued that the subject of industry bias was understudied (McCambridge and Mialon 2018).

  66. 66.

    Rabin (2018) and Thacker (2018).

  67. 67.

    Fogarty (2010) and Nelson (2011).

  68. 68.

    Nelson (2014a).

  69. 69.

    Lewin (2002).

  70. 70.

    McNeil (2003).

  71. 71.

    Nelson (2011).

  72. 72.

    See Seltzer (1997). Note that the former National Heart and Lung Institute is now called the National Heart, Lung, and Blood Institute.

  73. 73.

    Siegfried and Parry (2019).

  74. 74.

    In 2018, the Bureau collected nearly $21 billion in revenue from alcohol, tobacco, and firearm taxes against a total agency budget of just over $111 million. About $8 billion of that revenue was from alcohol excise taxes.

  75. 75.

    Notably, the United States federal government does not handle some other excise taxes in a similar fashion. Revenue from firearm and ammunition taxes is transferred to the Fish and Wildlife Restoration Fund, which uses the proceeds to fund grants for hunter education and wildlife restoration.

  76. 76.

    The percentages vary from year to year and can be calculated based on data reported in the Washington State Liquor and Cannabis Board’s annual reports.

  77. 77.

    Pan and Bai (2009). The federal government was biased against evidence that contradicted DARE’s efficacy. When a study funded by the Department of Justice concluded that DARE was a flop, the department refused to publish it (Ingraham 2017).

  78. 78.

    Based on figures reported in Alcohol Justice’s 2015 through 2017 Form 990.

  79. 79.

    Based on figures reported in the Center on Addiction’s 2017 Form 990.

  80. 80.

    Based on figures reported in Texans Standing Tall’s 2017 Form 990.

  81. 81.

    Based on figures reported in MADD’s 2017 Form 990.

  82. 82.

    Crew and Johnson (2011) and Wheeler et al. (2004).

  83. 83.

    Bandow (1995).

  84. 84.

    Vandenberg and Sharma (2016).

  85. 85.

    Sloan and Githens (1994) and Sloan et al. (1995).

  86. 86.

    Benson et al. (1999), Dee (2001), Dills (2010), Rammohan et al. (2011), Scherer et al. (2015), Whetten-Goldstein et al. (2000), and Young and Likens (2000).

  87. 87.

    Bertelli and Richardson (2008), Chaloupka and Wechsler (1996), Evans et al. (1991), Kenkel (1993), and Wagenaar and Maldonado-Molina (2007).

  88. 88.

    Benson et al. (2000). To illustrate this point, Lenk et al. (2016) found that open container laws might not have an effect per se, but that open container enforcement does.

  89. 89.

    See “Trends in the Prevalence of Alcohol Use National YRBS: 1991–2017,” a data summary published by the Centers for Disease Control and Prevention.

  90. 90.

    Carpenter et al. (2019).

  91. 91.

    Dee (1999).

  92. 92.

    Hao and Cowan (2019).

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Thom, M. (2021). Taxing Alcohol. In: Taxing Sin. Palgrave Macmillan, Cham. https://doi.org/10.1007/978-3-030-49176-5_3

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