Alcohol Policies Project

Center for Science in the Public Interest

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A response to beer-industry propaganda

 

The Incredible Shrinking Beer Tax

Economics:

  • The federal beer tax has been increased only once in the last five decades, 1991.  Even at today's rate, $18.00 per barrel, the tax would have to increase to $1.15 per six-pack (from its current level of approximately $0.33) just to offset the effects of inflation since 1951.

  • In its September 2003 report, the National Academy of Sciences' Institute of Medicine recommended raising alcohol excise taxes, stating that "top priority should be given to raising beer taxes," since underage drinkers use and abuse beer more than any other type of alcoholic beverage.1

  • The federal beer tax produced more than $3.2 billion for the federal treasury in 2002.2  However, if the tax rate had kept up with inflation since 1951, the amount of revenue collected would have exceeded $11.1 billion.3

  • The combined federal and average state beer excise tax rate amounts to $0.47 per six-pack, or less than 10% of the average price of a six-pack.

  • 23 states have not raised their beer-tax rates in more than 20 years.  As a result, the current rates have eroded in value by up to 87 percent in some states.

  • Many states with low beer-tax rates are missing the opportunity to pay for much-needed state programs, such as public education, healthcare, substance abuse treatment and prevention, and others, by keeping those rates low.  Modest increases in the tax rate could raise millions in state revenue.

  • State alcohol taxes have declined in value by an average of 46 percent in the past 20 years.3

  • Raising beer taxes will raise beer prices and moderately depress consumption, ultimately reducing alcohol-related problems (see below).

  • Low beer-tax rates are reflected in low beer prices and increased availability of beer to underage youth and other price-sensitive people.

 

Taxes & Consumption:

  • Numerous studies show that raising beer taxes will help reduce alcohol-related problems:

    • gonorrhea and syphilis rates4

    • incidents of crime and violence, especially domestic violence, child abuse, and rapes5

    • beer consumption by underage youth6

    • alcohol-related traffic fatalities and crashes7

  • Increasing beer taxes could:

    • provide millions of dollars for state coffers -- money that can be used for education programs, healthcare funding, substance abuse treatment and prevention programs, etc.

    • increase college attendance and graduation rates.8

 

Public Opinion:

  • Public opinion polls show that a large majority of adults support raising beer taxes to fund youth substance abuse treatment and prevention programs.9

  • The American Medical Association (AMA) found that the majority of Americans (65%) prefer raising alcohol taxes to other taxes to help reduce state budget deficits.  In particular, most Americans (52%) think that their state's beer tax rate should be raised, with 32% stating that the beer tax should be raised "a lot."10

  • More than 70% of Americans want to raise beer taxes to fund the following programs:10

    • education and health care

    • stronger enforcement of drinking and driving laws

    • treatment programs for teenagers with drinking problems

    • stronger underage drinking law enforcement

    • prevention programs for underage people

    • state budget deficit

    • treatment programs for people with drinking problems

    • cutting other state taxes

  • Most Americans agree that it's fair to tax beer more than other products because of the social and health problems caused by alcohol consumption.  In addition, a majority of Americans would support raising alcohol taxes if the revenues go to specific earmarked funds.11

 

References:

1. National Research Council and Institute of Medicine (2004). Reducing Underage Drinking: A Collective Responsibility. Committee on Developing a Strategy to Reduce and Prevent Underage Drinking, Richard J. Bonnie and Mary Ellen O'Connell, Editors. Board on Children, Youth, and Families, Division of Behavioral and Social Sciences and Education. Washington, DC: The National Academies Press. Online: http://www.nap.edu/books/0309089352/html/.

2. Internal Revenue Service. (2004). Federal Excise Taxes Reported to or Collected by the Internal Revenue Service, Bureau of Alcohol, Tobacco and Firearms, and Customs Service, by Type of Excise Tax, Fiscal Years 1996-2003. Online: http://www.irs.gov/pub/irs-soi/03ex21te.xls.

3. U.S. Bureau of Labor Statistics.

4. Chesson, H., Harrison, P. & Kassler, W.J. (2000). Sex under the influence: The effect of alcohol policy on sexually transmitted disease rates in the United States. Journal of Law and Economics. XLIII:215-238.

5. Markowitz, S. & Grossman, M. (1998). Alcohol regulation and domestic violence towards children. Contemporary Economic Policy. 16(3):309-320.  Grossman, M. & Markowitz, S. (2000). Alcohol regulation and violence on college campuses. Research report. National Bureau of Economic Research. January 2000.

6. Chaloupka, F.J., Grossman, M. & Saffer, H. (2002). The effects of price on alcohol consumption and alcohol-related problems. Alcohol Research & Health. 26(1):22-34. Online: http://www.niaaa.nih.gov/publications/arh26-1/22-34.pdf.  Cook, P.J. & Moore, M.J. (2002). The economics of alcohol abuse and alcohol-control policies. Health Affairs. 21(2):120-133.  Grossman, M., Chaloupka, F.J., Saffer, H. & Laixuthai, A. (1994). Effects of alcohol price policy on youth: A summary of economic research. Journal of Research on Adolescence. 4(2):347-364.  Cook, P.J. & Moore, M.J. (1993). Drinking and schooling. Journal of Health Economics. 12:411-429.  Lockhart, S.J., Beck, K.H. & Summons, T.G. (1993). Impact of higher alcohol prices on alcohol-related attitudes and perceptions of suburban, middleclass youth. Journal of Youth and Adolescence. 22(4):441-454.

7.  Ruhm, C.J. (1996). Alcohol policies and highway vehicle fatalities. Journal of Health Economics. 15(4):435-454.

8.  Cook, P.J. & Moore, M.J. (1993). Drinking and schooling. Journal of Health Economics. 12:411-429.

9.  Harwood, E.M., Wagenaar, A.C. & Zander, K.M. (1998). Youth access to alcohol survey: Summary report. Princeton, NJ: Robert Wood Johnson Foundation. Online: http://www.rwjf.org/publications/publicationsPdfs/Youth_Access_to_Alcohol_Survey.pdf.

10. The American Medical Association. National Survey on Alcohol and Beer Taxes. Press Release Online: http://www.ama-assn.org/ama/pub/article/1616-8551.html.

11. MADD/CSPI Nationally Representative Poll conducted by Penn, Schoen, Berland & Associates, Inc. July and August 2002.