I’ll Drink to That

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December 26, 2007 11:41 a.m.

How much do we subsidize alcohol consumption? In his book, Paying the Tab, economist Philip Cook notes that, when adjusted for inflation, taxes on alcohol have dropped by 33 percent since 1992. Alcohol use impose costs on everyone else — 17,000 drunk driving deaths annually, 65,000 other alcohol related deaths, plus child and spousal abuse and medical costs for those who survive. Alcohol taxes, at least theoretically, cover the alcohol-related costs of police enforcement and public health care.

David Leonhardt argues in today’s New York Times that we should continue alcohol sales, but the costs should be borne by those who buy and use alcohol. And that means raising taxes on alcohol sales.

User taxes nearly always fall harder on lower and middle income families because, as a percentage of income, a drink (and the related taxes) cost a poor person more than a rich person. But user taxes also make sure that those who impose costs bear a larger proportion of the costs. Moreover, as taxes rise, some people are influenced by the increase costs to buy less of the taxed goods, which, in the case of liquor, has positive health benefits as well as benefits for others who aren’t killed or injured.

Ironically, even as alcohol taxes have decreased, sales taxes on all goods are increasing. These taxes also fall harder on lower and middle income families, but, unlike alcohol taxes, they are not designed to offset specific costs. The benign and the dangerous are taxed alike. Nor are taxes on food or clothing something a family can avoid easily by not making purchases.

As a group, taxpayers will pay for police protection and hospitalization for those who have no health insurance. An increase in alcohol taxes is much better for middle class families than a more modest increase in sales taxes across the board. Thanks to Cook for his book and to Leonhardt for featuring it.

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