Starting 2023 with Dry January? We can reduce alcohol consumption even further through taxes.
Many Americans will attempt a dry January or make a New Year’s resolution to cut back on longer-term alcohol consumption. Those who are successful can benefit in a variety of ways, including reduced calorie consumption, better sleep, better brain health, and a reduced risk of injury in a fall or other accident. But reducing the extraordinary harm alcohol causes to public health and safety should not be left to scattered individual efforts when there is a public policy available that would benefit everyone: raise taxes on alcohol.
The purchase of commodities ranging from gasoline to movie streaming to homes is subject to what economists call the law of demand. It’s a fancy way of describing a common-sense reality: people buy fewer products when their price goes up and more when they go down. There are a few exceptions to the law of demand, but hundreds of studies around the world show that alcohol is not one of them.
There is therefore a relationship between the rise in American alcohol consumption and the decline in the cost of alcohol over the past quarter century. The average annual alcohol consumption of Americans has increased from 2.15 gallons in 1995 to 2.45 gallons in 2020, or 10 cans of beer or glasses of wine each week. The affordability of alcohol relative to income has increased over the same period, meaning alcohol consumption has become cheaper. Estimates of the responsiveness of alcohol purchasing to price changes vary, but even the most conservative estimates indicate that falling prices account for most of the increase in alcohol consumption per year.
Alcohol has become more affordable because when federal taxes on the product were last set in 1991, they were set in flat amounts, such as $1.07 per gallon for most wine and 18 $ per barrel of beer. Due to inflation, the impact of taxes on alcohol affordability has declined in real terms since then. Indeed, the biggest change Congress made to federal alcohol taxes during the period was to reduce them for craft beer and spirits producers. (Many states also add alcohol taxes, which vary widely, but have also generally declined in real terms over time.)
Many Americans instinctively hold to the idea of higher taxes, and it’s certainly fair for anyone to wonder if the benefits of reduced alcohol consumption could possibly justify higher taxes. But the answer to this question is clearly yes.
Although many people do not view alcohol as an addictive and potentially deadly drug, the data supports the opposite. In 2020, there were some 99,000 alcohol-related deaths in the United States. By comparison, there were 68,630 from opioid overdoses and 19,480 from cocaine. There are more arrests for alcohol-related crimes than for all illicit drugs combined each year, and alcohol use disorder is more common than any illicit drug disorder among incarcerated people in America. And when asked if their attacker was under the influence of a drug, victims of violent crime mentioned alcohol twice as often as all illegal drugs combined. A reduction in alcohol consumption would therefore almost certainly bring important benefits not only to public health but also to public safety.
In fact, economists Phil Cook and Christine Durrance estimated that the increase in federal liquor taxes in 1991, which resulted in a 6% increase in the price of alcohol, reduced traffic accidents, injuries and violent crimes, saving 7,000 lives in that year alone. Given that most heavy drinkers are men and that men commit approximately 80% of violent crimes, including domestic violence and rape, women likely enjoyed a particularly large safety advantage through the reduction in alcohol consumption caused by the increase in taxes.
It is often claimed that excise taxes are regressive, meaning that they weigh heavily on the poor as they end up spending a higher share of their income on them. But studies of alcohol taxes show that they are mostly paid by high-income people, not least because low-income people have the highest abstention rate from alcohol, often for cultural reasons. or religious.
The arguments in favor of an increase in taxes on alcohol are therefore very strong and certain advocacy groups are vigorously campaigning for them. The politically powerful alcohol industry stands in the way, but the experience of the tobacco industry and the opioid industry has shown that when the death and destruction caused by a drug becomes more than Americans can bear , political leaders can find the courage to put the public interest above the social interest. When the new Congress convenes on Tuesday and focuses on the drug addiction crisis in the United States, raising alcohol taxes is expected to be high on its agenda.