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November 30, 2021

Are Low Alcohol Taxes Adding to the Alcoholism Problem?

In a very strange study, some experts are pointing to a low excise tax on alcohol being part of the problem with the countries rates of alcoholism. Could adding a few more cents per drink really help people stop drinking?

The Excise Tax

Throughout the United States, an excise tax is the most common form of taxation on most beer, wine, and spirits. However, a study released by the Journal of Studies on Alcohol and Drugs points to these low excise taxes being both outdated, and possibly part of a larger issue.

First of all, the tax is not only outdated but is riddled with gray areas. Largely in the way that the formula is worked out, for example:

  • Tax is based on a fixed “cost per unit volume” equation, i.e., $25 for a barrel of wine or beer. This can be easily loopholed.
  • For the study, since the tax formula was so gray, the researchers focused on the alcohol taxes associated with individual drink sizes.
  • On average, the alcohol tax falls at 3 cents for 12 ounces of beer, 3 cents for a glass of wine, and 5 cents for a shot of liquor.
  • The flat excise tax is based on volume sold, not the sale price percentage, so it is not affected by inflation
  • Excise tax rates haven’t been changed in a few decades, so the researchers discovered that, with consideration of inflation, the alcohol taxes have declined by 32 percent for spirits, 27 percent for wine, and 30 percent for beer since 1991.

According to the Timothy Naimi, M.D., M.P.H from BU School of Medicine and the leading researcher on this study, “The most important thing here is that the alcohol excise taxes are incredibly low. In several states, the price is so low that it rounds to zero pennies – basically no excise tax at all.”

Benefits of Increasing Alcohol Tax

Now before you go into a panic, as my brain first did when I read the study, despite having two years sober, there would actually be a lot of benefits of having a higher alcohol tax throughout the nation.

The two main reasons why these alcohol taxes have been largely overlooked are, they are unnoticed by the consumer, and there is political pressure NOT to raise taxes on alcohol sales.

However, Naimi states that studies have shown that increasing alcohol taxes in the past has helped lower alcohol consumption rates and related harms.

There’s very strong evidence that raising prices through taxes or other means — making it a little less cheap — has lots of possible benefits. For people who are drinking a lot, it has a surprisingly big impact on consumption and related harms. Raising taxes could help solve state budget problems and is a great way to raise revenue. A lot of people would cast it as a win-win.” – Timothy Naimi

Nationwide Impact

Every year, over 88,000 deaths and over $250 billion in related costs are associated with alcohol consumption. Our society has placed drinking, binge drinking, and excessive drinking, far beyond the normal standard. Most other countries view drinking as a light, social affair, even having the legal drinking age to be as low as 16 in some countries.

Meanwhile, in the US, the drinking age is 21, as it is considered an “adult privilege”, yet more than half of the population of adolescents and teens under the age of 20 have reported experimenting with alcohol, and alcohol abuse syndrome is on the rise in the younger adults of the country.

Not to mention, even many of the adults who abuse alcohol engage in risky behaviors such as drinking and driving and unsafe sex practices.

So, according to the research performed by Timothy Naimi and his team, by even increasing the alcohol tax rate by 10 percent, people tend to drink 5-6% less than they would at the current alcohol tax rate.

The money that would be brought in from this alcohol tax would be able to go towards health care costs around alcohol-related car accidents, as well as increased funding for education for young adults and teens.

The Cost of Low Cost

“Unless taxes are adjusted, they’re constantly eroding due to inflation,” he said. “Price has a dampening effect on consumption, and higher taxes definitely put the brakes on how much people drink. It’s a pretty efficient way to cut consumption and related harms” reports Naimi.

Other studies and researchers from the University of North Carolina Greensboro and even Uconn agree with Naimi and his team, encouraging the consideration of an increased alcohol tax would bring about more revenue for states, all the while decreasing alcohol consumption. No to mention, it would reduce health care costs. They are calling this alcohol tax increase plan a “trifecta” against the current alcoholism problem in the nation.

It’s Up to the States

While the same excise alcohol tax is used throughout the nation, each state does have control over how much they themselves are taxing alcohol sales. While this research has been tested and confirmed, it has not been brought forth to any local or state government committees to be voted on or against.

The consideration of increasing the alcohol tax is, as the researchers from UConn and UNC put it, “ a moral obligation to prevent the further erosion of the protections that tax policies provide to excessive drinkers”

If you are now sober and reading this, it seems pretty understandable information. However, a large portion of the nation is not alcoholic, yet does indulge in binge drinking from time to time. Do you think this research could help people reduce their drinking habits, alcoholic or not? If so, it is always possible to send an email to your local government asking them to consider the potential benefits of increasing the alcohol tax.


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