State Alcohol Taxes and Health:
A Citizen's Action Guide

INTRODUCTION

Alcohol is a major cause of premature death in the United States and a primary contributor to a wide array of economic costs and social problems. These include lost productivity, health care expenditures, motor vehicle crashes, violence, crime, spousal and child abuse, falls, fires, drownings, and suicides.

In addressing alcohol problems, policy makers have promoted a variety of education, law enforcement, and rehabilitation programs that zero in on a few highly visible alcohol issues, such as drinking and driving, youth alcohol use, and alcohol dependence. Yet they have devoted little attention to a policy measure that promises to help reduce all types of alcohol problems and provide needed revenues for alcohol prevention, treatment, and law enforcement programs. That measure is raising alcohol taxes.

Why raise taxes?

Numerous economic studies have demonstrated that increasing alcohol excise taxes is one of the most effective means of saving young lives and reducing the incidence of liver cirrhosis mortality, the eleventh leading cause of death in the United States. Other studies have noted that alcohol price increases help raise college graduation rates and reduce crime. Some studies indicate that tax hikes are more effective at reducing alcohol consumption among young people than boosts in the minimum legal drinking age.

Despite that evidence, attempts to increase alcohol taxes have been far less successful than similar efforts to raise taxes on tobacco products, an effective policy to reduce teen smoking. In several states, public health activists have won major tobacco tax increases that have raised millions of dollars in new revenues and provided funds for innovative and effective anti-smoking public education campaigns. Raising cigarette taxes has helped create a better balance between the enormous costs of cigarette smoking and the revenues received by governments that ultimately bear many of these expenses.

Inflation: A persistent thief

Alcohol problems cost society some $166.5 billion per year and cause as many as 107,400 deaths annually. In contrast, 1995 tax revenues from alcoholic beverages provided only $7.5 billion at the federal level and approximately $9.4 billion at the state and local levels.

Much of this disparity between revenues and costs is due simply to the failure of alcohol tax rates to keep up with inflation. For example, had federal and state taxes kept up with inflation between 1970 and 1995, alcohol taxes would have contributed billions of dollars more than they actually did.

Relatively static alcohol tax rates have also meant that prices of alcoholic beverages have increased far less than those of other consumer goods. The results: It’s no surprise today to find beer available at the corner store for no more than the price of soft drinks.

Raising alcohol taxes and indexing them so that they will increase at the rate of inflation will help keep alcoholic beverage prices in line with those for other consumer goods. Such increases will allow governments to reclaim a valuable source of revenue that has declined dramatically over the years.

Equity and urgency

For most consumers -- who drink minimally or not at all -- a tax increase will hardly be noticed. Consumers will pay in proportion to how much they drink, and the bulk of the tax hikes will be paid by the relatively small percentage of drinkers who consume most alcohol. These same drinkers, not surprisingly, are responsible for the highest concentration of alcohol-related problems and societal costs. Higher taxes will force them to bear a more equitable share of the costs for the problems they cause and help discourage some excessive alcohol consumption.

New tax revenues now take on even greater importance as federal budge cuts force state governments to trim essential social programs or seek alternative sources of funding. Among the programs facing cuts are those that prevent and fight alcohol problems.

This handbook provides tools to help public health activists, community coalitions, and others use alcohol tax policy as an effective means of addressing alcohol’s high costs to society. We hope it will stimulate spirited public debate about the relationship between alcohol taxes and the health and safety of America’s communities.

CSPI 1996

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