Having the strong view that alcohol taxes are kept too low in the United States by a combination of industry power and anti-tax sentiment, I was startled to see this ambivalence (at best) from my friend John Hudak and his colleague Jonathan Rauch at Brookings:
“Public health advocates would like to see less advertising reaching minors, and they argue that alcohol taxes are too low to cover social externalities and deter use. The industry argues that taxes are already punitively high.15 Because regulatory practices and taxes differ across states and change over time, generalizing is complicated. On the whole, however, the regulatory regime for alcohol does a credible job of restraining antisocial and irresponsible practices, has proved to be broadly acceptable to the public and the industry, and has also proved to be stable and sustainable. In those important respects, modern regulation of Big Alcohol is a success story.”
Here’s the backup, from footnote 15:
“The Distilled Spirits Council of the United States complains that 54 percent of the retail price of a typical 80-proof bottle goes to taxes and fees. The Beer Institute similarly complains that more than 40 percent of what Americans pay for beer goes to taxes and fees. See, e.g., http://www.discus.org/policy/taxes/ and http://www.beerinstitute.org/policy-issues/excise-tax.”
Over a third of DISCUS’s “54 percent,” according to its own analysis, comes from “personal income, corporate income, payroll and property taxes.” http://www.discus.org/assets/1/7/Spirits_Bottle_Chart2.pdf. The 40-percent beer number includes everything “from excise to consumption to sales taxes, as well as the normal business taxes.” Yeah, well, counting taxes everybody pays gets you a big number. Interest groups tell their side of the story, naturally enough.
Well, I’m not buying the argument that alcohol is overtaxed, but am sticking with the conventional wisdom:
“[S]tudies provide consistent evidence that higher alcohol prices and alcohol taxes are associated with reductions in both excessive alcohol consumption and related, subsequent harms. Results were robust across different countries, time periods, study designs and analytic approaches, and outcomes. . . . [T]hese studies provide strong evidence that raising alcohol taxes is an effective strategy for reducing excessive alcohol consumption and related harms.”
And there’s this:
“despite . . . caveats and gaps in the research, the overwhelming evidence, both in the United States and internationally, is that levels of alcohol consumption and alcohol-related problems are price sensitive and that alcohol taxation policies are an appropriate and critical element of a comprehensive approach to the prevention of alcohol-related problems.”
And there’s Paying the Tab, by Phil Cook at nearby Duke, “which demonstrates that higher alcohol excise taxes and other supply restrictions are effective and underutilized policy tools that can cut abuse while preserving the pleasures of moderate consumption.”
I was seriously surprised to see Brookings so cautious on the level of alcohol taxes today. Federal taxes have been stuck at low, unindexed levels since the “Read My Lips” tax bill of the early 1990s. So they go down, in real terms, every day.
Alcohol taxes used to supply a third of the federal budget. Those were different days, but for serious thinkers to suggest that alcohol is undertaxed today is a challenge. Tax burdens are always value judgments, and regressivity is a concern, so I’m willing to hear more. But for now, if I were making a list of revenue sources, alcohol and carbon would lead the list — along with other things that cause problems.