Noted Economists Support Higher Taxes on Alcoholic Beverages

Coalition Cites Budget Deficit, Social Costs of Alcohol

May 16, 2005

Some of America's most distinguished economists today called for what they say are long-overdue increases in federal excise taxes on alcoholic beverages to help offset the massive economic and social costs of alcohol. In a declaration to Congress organized by the Coalition for the Prevention of Alcohol Problems (CPAP), the economists, who include four Nobel laureates, say legislation promoted by the alcohol industry to reduce such taxes would damage public health, increase budget deficits, and threaten the safety of Americans, especially young people.

"Through neglect, Congress has allowed effective rates of tax on a substance that does more harm than any illegal drug to fall dramatically, even as the federal budget has sunk far into the red," said Henry Aaron, senior fellow in economic studies at the Brookings Institution. "As our elected officials deliberate on how to deal with our fiscal woes, they would be well advised to increase a tax that would both help close the federal deficit and discourage the continued epidemic of alcohol abuse."

Citing government reports on the effects of alcohol taxes, the economists urged lawmakers to avoid adding to the national debt by rejecting industry appeals to lower federal taxes on alcohol, which have only increased once in 54 years for beer and wine and only twice for liquor.

"Tens of millions of dollars a year already are spent marketing alcoholic beverages to underage consumers," said George A. Hacker, director of the Alcohol Policies Project at the nonprofit Center for Science in the Public Interest and a CPAP convener.  "Lower taxes and lower prices will only further entice young people to drink. Calls for an alcohol tax reduction clearly are designed to line the pockets of the alcohol industry, without regard to the consequences."

According to Stacia Murphy, president of the National Council on Alcoholism and Drug Dependence, the total cost of alcohol use by youth alone exceeds $58 billion per year.

"As a society, we’ve got to do a far better job of informing our citizens – and our young people, especially – that there is no free ride when it comes to alcohol consumption," Murphy said.  "Do we really want to encourage any more drinking by lowering the cost of alcohol?"

Signatories to the Economists’ Declaration on Federal Alcohol Excise Taxes include George Akerlof, Daniel Kahneman, Lawrence Klein, and Robert Solow, all winners of the Nobel Prize for Economics, as well as 55 other leading economists.


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