Alcohol Taxes
From Families USA • May 2012
Alcohol Taxes and Public Health
Excessive use of alcohol takes a devastating toll on our country every day. It
leads to lost productivity, health problems, crime, violence, car crashes, and
even deaths. The costs associated with these problems fall not just on heavy
drinkers and their loved ones, but on all Americans. Strict enforcement of
drunk driving and underage drinking laws and public education on the dangers
of excessive drinking are undoubtedly important in the effort to curb alcohol
misuse. But one of the most effective ways to reduce excessive use of alcohol is
easier and less expensive: Simply raise alcohol taxes.
Alcohol taxes in the United States are low and are updated so infrequently that
their value has declined significantly over time. Raising these taxes will curtail
drinking, particularly heavy drinking, and it will also reduce the consequences
of alcohol use and abuse.1 Furthermore, these taxes can be an important source
of funding at the local, state, and federal levels.
In this piece, we present an overview of the negative consequences of alcohol
misuse, as well as statistics that show how raising alcohol taxes can reduce
these consequences—and even save lives.
„„
Alcohol consumption in the United States is concentrated in a small portion
of the population that drinks heavily.
The vast majority of American adults do not drink heavily. Most of the alcohol that is
consumed in this country is consumed by the small segment of the population that
binge drinks.
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Nearly half of American adults do not drink at all, and an additional quarter drink
infrequently.
„„
Binge drinkers make up just one-quarter of the U.S. population, but they drink
three quarters of all the alcohol that is consumed. (Binge drinking is defined
as when a man drinks five or more drinks at a time [usually within a two-hour
timeframe] and when a woman drinks four or more drinks at a time).2
2
Alcohol Taxes and Public Health
„„
However, excessive drinking hurts all Americans, whether they drink or not.
As mentioned above, heavy drinking reduces workplace productivity and causes health
problems, injuries, violence, and deaths. Each year, excessive drinking costs the country about
$1.90 per drink, or $746 per person, totaling $223.5 billion.3
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Excessive drinking is the third leading cause of preventable death in the United States.4 A
total of 80,000 lives are lost to alcohol abuse each year. Binge drinking is responsible for
more than half of these deaths.5
„„
Excessive drinking can lead to alcoholism; injuries; cirrhosis of the liver; and cancers of
the head, neck, digestive tract, and breast.6
„„
Every year, at least a quarter of all rapes, forcible assaults, robberies, burglaries, and
incidences of vandalism, and 47 percent of all homicides, are attributable to alcohol abuse.7
„„
Lost productivity due to alcohol-related illness, death, disability, and incarceration costs
$161 billion each year.8
Current alcohol taxes do not reflect the high cost of excessive drinking.
Alcohol taxes in the United States are low and decrease in value each year. Today’s alcohol tax
revenues do not come close to covering the costs associated with excessive drinking.
There are two types of alcohol taxes: excise taxes and sales taxes. Excise taxes are charged to
wholesalers based on the type of alcohol and the amount being produced. Wholesalers then
pass these increases on to retailers, who pass them on to consumers.
The federal government charges different excise taxes on beer, wine, and liquor. The taxes
per gallon are fixed amounts that do not change with inflation, so their impact on price has
declined considerably over time. The value of federal excise taxes on alcohol has dropped by
37 percent since Congress last updated the taxes in 1991. For example, a glass of wine that
cost $4 in 1991 now costs $6.28, but the tax on that wine is still just 4 cents. 9
State, county, and local governments can also tax alcohol. All states have their own excise
taxes on at least one form of alcohol, and many tax all three forms (beer, wine, and liquor).
Some states have special alcohol sales taxes as well.
„„
The United States has some of the lowest alcohol excise taxes in the developed world. In many
European countries, taxes on liquor are three times what they are in the United States.10
„„
The value of all federal and state alcohol excise taxes declines every year because these
taxes are not tied to inflation. The current tax on beer, for example, is $18 per barrel, but
if it had kept up with inflation, it would be $71 per barrel.11
„„
In 2006 (the most recent year for which data are available), excessive drinking cost an
estimated $223.5 billion, or $1.90 per drink. Of this, 80 cents per drink was paid for
directly by federal and state governments (through costs to the criminal justice system
and health care costs, for example).12 In contrast, federal excise taxes on alcohol are about
8.5 cents per drink, and state excise and sales taxes are an average of 5 cents per drink.13
Alcohol Taxes and Public Health
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Raising alcohol taxes reduces excessive drinking and alcohol-related problems.
Raising the price of alcohol by levying higher taxes reduces excessive drinking and the
problems it causes.
„„
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Doubling alcohol taxes would reduce alcohol-related deaths by 35 percent, traffic fatalities
by 11 percent, and cases of sexually transmitted infections by 6 percent.14
„„
An increase in alcohol taxes of 25 cents a drink would reduce excessive drinking by
11 percent. High-risk drinkers would pay nearly five times more in taxes than low-risk
drinkers (because they drink more).15
„„
Even a nickel per drink increase in alcohol taxes would reduce fatal traffic accidents by 7
percent and deaths due to cirrhosis by 32 percent.16
Increasing alcohol taxes makes the roads safer for everyone by reducing drunk
driving.
High numbers of fatal traffic accidents are associated with heavy drinking.
„„
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Three in 10 Americans will be in an alcohol-related traffic accident during their lifetime. 17
„„
Drunk drivers kill one person every 50 minutes in the United States.18
„„
A 10 percent increase in the price of beer would reduce traffic accidents by 5 to 10
percent and traffic accidents involving youth by 7 to 17 percent.19
Raising alcohol taxes reduces underage drinking.
Close to half of all high school students drink, and one in four binge drinks.20 However,
because most people under age 21 do not have much disposable income, raising alcohol taxes
can reduce underage drinking significantly.
„„
Underage drinkers consume 11 percent of the alcohol that is consumed in this country,
almost all while binge drinking.21
„„
Underage drinking results in the deaths of 5,000 people under age 21 annually. The most
common causes of death are motor vehicle crashes, homicides, and suicides.22
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Teen drinking is also associated with higher rates of risky sexual behaviors.23
„„
Underage drinking is very responsive to changes in the price of alcohol.24
„„
Higher alcohol taxes lead to improved graduation rates and study habits, as well as higher
grades.25
3
4
Alcohol Taxes and Public Health
Endnotes
1
Frank J. Chaloupka, The Effects of Price on Alcohol Use, Abuse, and Their Consequences, Reducing Underage Drinking: A Collective Responsibility
(Washington: National Academies Press, 2004), available online at http://www.nap.edu/openbook.php?record_id=10729&page=541;
Randy W. Elder, Briana Lawrence, Aneeqah Ferguson, Timothy S. Naimi, Robert D. Brewer, Sajal K. Chattopadhyay, Traci L. Toomey,
Jonathan E. Fielding, and the Task Force on Community Preventive Services, “The Effectiveness of Tax Policy Interventions for Reducing
Excessive Alcohol Consumption and Related Harms,” American Journal of Preventive Medicine 38, no. 2 (2010): 217-229, available online at
http://www.thecommunityguide.org/alcohol/effectivenesstaxpolicyinterventionsreducingexcessivealcoholconsumptionrelatedharms.pdf.
2
Office of Juvenile Justice and Delinquency Prevention, Drinking in America: Myths, Realities, and Prevention Policy (Washington: U.S.
Department of Justice, Office of Justice Programs, 2005), available online at http://www.udetc.org/documents/Drinking_in_America.pdf.
3
Ellen E. Bouchery, Henrick J. Harwood, Jeffery J. Sacks, Carol J. Simon, and Robert D. Brewer, “Economic Costs of Excessive Alcohol
Consumption in the U.S., 2006,” American Journal of Preventive Medicine 41, no. 5 (2011): 516-524, available online at http://download.
journals.elsevierhealth.com/pdfs/journals/0749-3797/PIIS0749379711005381.pdf.
4
Ali H. Mokdad, James S. Marks, Donna F. Stroup, and Julie L. Gerberding, “Actual Causes of Death in the United States, 2000,” Journal of
the American Medical Association 291, no. 10 (2004): 1,238-1,245.
5
Centers for Disease Control and Prevention, Alcohol Related Disease Impact (Atlanta, GA: CDC, 2008), available online at http://www.cdc.
gov/alcohol/ardi.htm.
6
The National Institute on Alcohol Abuse and Alcoholism, 10th Special Report to the U.S. Congress on Alcohol and Health (Bethesda, MD: U.S.
Department of Health and Human Services, 2000), available online at http://pubs.niaaa.nih.gov/publications/10report/intro.pdf.
7
Ellen E. Bouchery, Henrick J. Harwood, Jeffery J. Sacks, Carol J. Simon, and Robert D. Brewer, “Economic Costs of Excessive Alcohol
Consumption in the U.S., 2006, Appendix B,” American Journal of Preventive Medicine 41, no. 4 (2011): A1-A14, available online at http://
download.journals.elsevierhealth.com/mmcs/journals/0749-3797/PIIS0749379711005381.mmc1.pdf.
8
Ellen E. Bouchery, Henrick J. Harwood, Jeffery J. Sacks, Carol J. Simon, and Robert D. Brewer, “Economic Costs of Excessive Alcohol
Consumption in the U.S., 2006,” op. cit.
9
Chuck Marr and Gillian Brunet, Reversing the Erosion in Alcohol Taxes Could Help Pay for Health Reform (Washington: Center on Budget and
Policy Priorities, 2009), available online at http://www.cbpp.org/files/5-27-09health.pdf.
10
James R. Hines Jr., “Taxing Consumption and Other Sins,” Journal of Economic Perspectives 21, no. 1 (2007): 49-68, available online at
http://aysps.gsu.edu/isp/files/SESSION_IX_Taxing_Consumption_and_Other_Sins.pdf.
11
David H. Jernigan and Hugh Waters, The Potential Benefits of Excise Tax Increase in Maryland (Baltimore: Johns Hopkins Bloomberg School
of Public Health, 2009), available online at http://www.camy.org/action/Taxes/Tax_report_2009.pdf.
12
Office of Juvenile Justice and Delinquency Prevention, op. cit.
Timothy S. Naimi, “The Cost of Alcohol and Its Corresponding Taxes in the U.S.: A Massive Public Subsidy of Excessive Drinking and
Alcohol Industries,” American Journal of Preventive Medicine 41, no. 5 (2011): 546-547.
13
14
Alexander C. Wagenaar, Amy L. Tobler, and Kelli A. Komro, “Effects of Alcohol Tax and Price Policies on Morbidity and Mortality: A
Systematic Review,” American Journal of Public Health 100, no. 11 (2010): 2,270-2,278.
15
James I. Daley, Mandy A Stahre, Frank J. Chaloupka, and Timothy S. Naimi, “The Impact of a 25-Cent-Per-Drink Alcohol Tax Increase,”
American Journal of Preventive Medicine 42, no. 4 (2012): 382-389.
16
Phillip J. Cook, Paying the Tab: The Costs and Benefits of Alcohol Control (Princeton, NJ: Princeton University Press, 2007).
National Highway Traffic Safety Administration, Traffic Safety Facts 2000: Alcohol (Washington: NHTSA, 2001), available online at http://
www-nrd.nhtsa.dot.gov/Pubs/2000alcfacts.pdf.
17
18
The Century Council, State of Drunk Driving Fatalities in America, 2009 (Arlington, VA: The Century Council, 2010), available online at
http://www.centurycouncil.org/sites/default/files/files/SODDFIA.pdf.
19
Frank J. Chaloupka, op. cit.
Michael R. Pemberton, James D. Colliver, Tania M. Robbins, and Joseph C. Gfroerer, Underage Alcohol Use: Findings from the 2002-2006
National Surveys on Drug Use and Health (Rockville, MD: Substance Abuse and Mental Health Services Administration, 2008), available
online at http://www.oas.samhsa.gov/underage2k8/toc.htm.
20
21
Office of Juvenile Justice and Delinquency Prevention, op. cit.
U.S. Department of Health and Human Services, The Surgeon General’s Call to Action to Prevent and Reduce Underage Drinking, 2007
(Rockville, MD: HHS, 2007), available online at http://www.surgeongeneral.gov/topics/underagedrinking/calltoaction.pdf.
22
23
National Research Council, Reducing Underage Drinking: A Collective Responsibility (Washington: National Academies Press, 2004), available
online at http://www.nap.edu/openbook.php?record_id=10729&page=R1.
24
Scott Adams, Mckinley L. Blackburn, and Chad D. Cotti, “Minimum Wages and Alcohol-Related Traffic Fatalities among Teens,” Review of
Economic and Statistics, manuscript accepted for future publication, available online to journal subscribers at http://www.mitpressjournals.
org/doi/abs/10.1162/REST_a_00199?journalCode=rest.
25
Frank J. Chaloupka, op. cit.
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