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Alcohol taxes aren't doing enough to cover costs of alcohol-related incidents

Researchers say these taxes can be troublesome for consumers who don’t drink excessively

Photo (c) John_Brueske - Getty Images
A new study has explored who ends up paying for damage caused by alcohol-related incidents, and the results have prompted a group of researchers to reconsider the taxes currently put on these products.

Current federal laws require alcohol to be taxed, though it’s up to the states to impose further taxes. The researchers believe that more taxes on alcohol would help to reduce consumers’ excessive alcohol consumption and ultimately lead to a safer, healthier society, as the current taxes don’t go far enough to cover the damage done following alcohol-induced damages. 

“Policy debates around alcohol taxes have mostly centered on public health benefits, but I think our study might change the focus of the debate somewhat, since it seems fair that those who drink the most and who produce and sell alcohol should cover the costs to society,” said researcher Jason G. Blanchette. 

Understanding the taxes

The researchers utilized state and federal tax data from 2010  to determine how different states’ alcohol taxes ultimately affected how much the government and consumers had to pay to resolve alcohol-related incidents. 

States have the option to tack on three other taxes, in addition to federal taxes: ad valorem taxes, state taxes, and specific excise taxes. The first two are dependent on the price of the alcohol, whereas the latter is dependent on the volume of alcohol. 

The researchers explained that all states charge consumers a specific excise tax. According to Blanchette, “that was the standard when alcohol prohibition was lifted.” But these taxes haven’t held up well over time because “they haven’t kept pace with inflation, so now they’re not worth much.”

Because hardly any states choose to impose their own additional taxes that would increase with higher-priced purchases, the researchers learned that the taxes the government collects hardly cover the cost of the damages that come from excessive alcohol consumption. 

While the federal government makes around 21 cents per drink on taxes, and states, on average, bring in 13 cents per drink on their taxes. Alcohol-related damages cost over two dollars per drink sold across the country. Though the government covers some of that money, consumers are ultimately the ones left with the price tag through their income tax. 

“The disparity between alcohol-related cost to government and alcohol taxes amounts to a large taxpayer-funded subsidy of excessive drinking and alcohol companies,” said researcher Dr. Timothy S. Naimi. 

The researchers believe that more can be done to alleviate this problem and take some of the monetary burden off of consumers who don’t drink excessively. They argue that one straightforward approach would be placing higher taxes on alcohol.

“The bottom line is that current alcohol taxes, even considering all types of tax including general sales taxes, don’t come close to covering alcohol-related costs,” Dr. Naimi said. 

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