Tax Analysis
High Taxes Destroy Jobs
The proposal to increase beverage alcohol excise taxes in Nevada by 50% or more
comes despite the fact that beverage alcohol is already overtaxed. On a typical bottle of
distilled spirits over 50% of the purchase price is already made up of a tax or fee of some
kind. Increased taxes will be passed along to consumers in the form of higher prices,
resulting in lost sales. Sales in Nevada are projected to decline by over $50 million,
causing over 700 people to lose their jobs.
These points are discussed below.
Distilled Spirits Already Overtaxed
 The proposal to increase beverage alcohol excise taxes in Nevada comes despite the
fact that, by any measure, distilled spirits are already overtaxed. For a typical bottle of
distilled spirits purchased in Nevada, over 50% of the retail price already goes to pay
a tax or fee of some kind.
 Raising the spirits excise tax rate from $3.60 to $5.40 per gallon would represent a
massive 50% increase in the spirts excise tax rate. Beer and wine taxes would face
similar increases.
Economic Impact: 700 jobs destroyed
 Excise tax increases are all passed along to consumers in the form of higher prices.
If the proposed tax increases were to go into effect, the price of a typical bottle of
spirits would increase by nearly 4.5%. Beer and wine prices would also go up.
 Unfortunately, people react to higher prices and Nevada businesses will lose sales as
consumers purchase less. Over $50 million in retail sales are projected to be lost in
package stores, bars and restaurants.
 The power to tax is the power to destroy. As sales fall, so does employment. Lower
sales and higher costs are never growth drivers for any industry. An estimated 700
jobs would be destroyed in the process.
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A FACT ABOUT ALCOHOL CONTENT:
No time to attack Nevada’s important hospitality industry
 Jobs lost because of the proposed tax increase would be concentrated in Nevada’s
important hospitality industry. This would be unfortunate, because it was not until
2016 that employment in the hospitality industry returned to pre-recession levels.
Proposal violates basic tenants of good tax policy
 Good tax policy seeks to apply low tax rates across the widest possible base. By
doing so, economic harm is minimized.
 By their very nature, taxes, fees and mark-ups imposed on beverage alcohol target a
very narrow set of products. And, since the products targeted are so narrow, the rate
is set high. As designed, the proposed tax and mark-up increases will maximize
economic harm.
Excise taxes are not user fees, but discriminatory taxes
 Some argue that beverage alcohol excise taxes are “user fees” imposed to cover
perceived social costs of alcohol abuse and the programs necessary for alcohol
abusers.
 However, in a true user fee the people who pay the fee also receive the benefits of
the government provided programs being paid for. Payment of the tax is directly
proportional to use of the government service. The classic example of a user fee is
the gasoline excise tax. Gasoline excise tax payments are proportional to the amount
that one drives and the use of government provided roadways.
 There are no negative social costs associated with normal, moderate consumption of
beverage alcohol, and 90-95% of legal age adults who enjoy beverage alcohol fall into
this category. Moderate drinkers are forced to subsidize abusive drinkers when
excise taxes are imposed.
 Since few citizens paying the tax would derive any benefit, excise taxes are not user
fees at all; they are simply highly targeted, discriminatory taxes. Without the
discredited user fee rationale, there is no social or economic reason to tax
beverage alcohol differently from any other product.
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Beverage alcohol taxes are regressive. People pay taxes, not corporations.
 Corporations do not pay taxes. Corporations are merely tax collectors that pass
proceeds along to the various Federal, State and Local Treasuries. People pay taxes.
Almost all tax increases levied on businesses are passed along to consumers in the
form of higher prices.
 Excise taxes are known to be the most regressive form of taxation, impacting persons
of lower income far more than the wealthy. When beverage alcohol taxes are raised,
it is the working poor who are most affected. Over one-third of all beverage alcohol
consumers (spirits, beer or wine) come from households having income of less than
$50,000.
Beverage alcohol taxes do not act as a deterrent to abusive drinking; population
level policies ineffective.
 In addition to failing the user fee test, beverage alcohol taxes do not appear to act as
a deterrent to abusive drinking. Raising taxes on beverage alcohol only serves to
penalize responsible beverage alcohol consumers and does not deter abusers for
whom taxes are of little concern. The National Institute on Alcohol Abuse and
Alcoholism (NIAAA), the government’s lead agency on alcohol issues, reported in its
January 2001 issue of Alcohol Alert that research suggests the heaviest-drinking 5
percent of drinkers do not reduce their consumption significantly in response to price
increases, unlike drinkers who consume alcohol at lower levels.
 Consistent with the NIAAA findings was a 2009 meta-analysis, “Effects of beverage
alcohol price and tax levels on drinking: a meta-analysis of 1003 estimates from 112
studies,” published in Addiction. The study found that heavy drinkers are far less
responsive to price increases than the total population of drinkers. And, it is important
to note that “heavy” is often defined in alcohol studies as anyone having more than
two drinks per day – not necessarily someone who has an alcohol use disorder. If
drinkers who consumed five or more drinks per day were isolated these populations
would be even less responsive to higher prices.
 Another 2009 study published by the National Bureau of Economic Research and
conducted by researchers at the Yale School of Public Health showed that heavy
drinkers were not at all responsive to higher prices. Thus, the study concluded that
higher alcohol taxes could not be justified based upon a public health or economic
justification.
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