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BRIEFING PAPER: EXCISE TAXES


The relationship between beer excise taxes and alcohol consumption among youth:

  • Studies demonstrate that increased beer prices lead to reductions in the levels and frequency of drinking and heavy drinking among youth and that higher taxes on beer are associated with lower traffic crash fatality rates, especially among young drivers (National Institute on Alcohol Abuse and Alcoholism {NIAAA}, Alcohol Alert No. 34, 9/96).

  • Researchers have estimated that even a small increase in the price of beer (10 cents per package of six 12 oz. cans) would reduce the number of 16- to 21-year olds who drink by approximately 11 percent, the number who drink two or three times per week by 8 percent, and the number who consume three to five cans of beer on a typical drinking day by 15 percent (NIAAA, Seventh Special Report to US Congress on Alcohol and Health from the Secretary of Health and Human Services, 1/90, p. 210).

  • When other variables were held constant in one study, States that had relatively high excise taxes on beer were found to have lower death rates in alcohol-related car crashes for 15- to 24-year-olds (Ibid., p. 211).


Public support for excise tax increases:

  • 85% of Americans favor alcohol excise tax (USA Today/CNN/Gallup poll, 3/1/93).

  • 87% of Americans could accept a 50-cent increase in the tax on a six-pack of beer and 85% said they could accept a $1 increase in the tax on distilled spirits or wine (Wall Street Journal/NBC-TV News poll, 3/12/93).


Current federal excise taxes on alcoholic beverages:

  • Although standard servings of distilled spirits, wine and beer all contain the same amount of ethanol, currently these alcoholic beverages are taxed at different rates by the federal government: $.11 per oz. of ethanol for wine; $.14 for beer; and $.28 for spirits. (NIAAA, Eighth Special Report to the US Congress on Alcohol and Health, 9/93, p. 258).


Reasons for equalizing the federal excise tax on alcoholic beverages:

  • Whether a tax on beer is more or less regressive than a tax on spirits, there is a widely held belief that spirits are in some sense more intoxicating than beer or wine, and hence more subject to abuse, while beer is the "drink of moderation" . . . However, much of the evidence works against this conclusion. [Researchers] note that "The consistent observation is that most drinkers prefer beer, and that drinkers who prefer beer are more likely to drive while intoxicated than those who prefer wine or distilled spirits." Furthermore, based on the results of a national survey, they conclude that beer is disproportionately preferred by higher risk groups: men far more than women, youths far more than older people, those who drink a lot during a typical session far more than those who drink moderately. While these results do not imply that tax [equalization] is the best policy, they do suggest that [equalization] is better than the current structure, where beer is taxed much lower than spirits (NIAAA, "Economics and the Prevention of Alcohol-Related Problems," Research Monograph 25, 1993, p. 53).

Excise taxes on alcohol and inflation:

  • Federal, State and local governments have raised taxes on alcohol modestly and infrequently, almost always with intent of increasing revenues rather than discouraging alcohol abuse. Due in part to the stability of these taxes, the real prices of alcoholic beverages (their prices after accounting for the effects of inflation) have declined significantly over time . . . Federal excise taxes on beer and wine were increased in 1991 for the first time since 1951. Taxes on distilled spirits, increased by about 19% in 1984, were raised in 1991 for the second time since 1951. These increases fell far short of those needed to offset the effects of inflation since 1951. For example, in 1991, the tax on distilled spirits was raised from $2.00 to $2.16 per fifth of 80-proof liquor. This tax would have to be raised to $8.80 per fifth to reach the same real value as it had in 1951. At the same time, the tax on beer doubled, from 16 to 32 cents per six-pack, while the tax on still wine jumped from just over 3 cents per 750-milliliter bottle to about 21 cents (still wine is considered separately from sparkling wines and champagnes, which are taxed at a higher rate). To reach the same real value they had in 1951, these taxes would have to be raised to 84 cents per six-pack and 18 cents per 750-milliliter bottle, respectively (NIAAA, Alcohol Health & Research World, Vol. 17, No. 1, 1993, p. 46-47).

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