Many Americans will attempt a Dry January or make a New Year’s resolution to cut back on drinking for the longer term. Those who succeed can benefit in various ways, including reduced calorie consumption, better sleep, improved brain health and lowered risk of being injured in a fall or other accident. But decreasing the extraordinary damage alcohol does to public health and safety should not be left to scattered individual efforts when there is a public policy available that would benefit everyone: raising alcohol taxes.
The purchase of products ranging from gasoline to movie streaming to houses is subject to what economists call the law of demand. This is a fancy way of describing a common sense reality: People buy less of products as their price rises and more of them when they fall. There are a few exceptions to the law of demand, but hundreds of studies conducted around the world show that alcohol is not one of them.
There is thus a relationship between American alcohol consumption rising and the cost of alcohol falling over the past quarter century. Americans’ average annual alcohol consumption increased from 2.15 gallons in 1995 to 2.45 gallons in 2020, or 10 cans of beer or glasses of wine every week. The affordability of alcohol relative to income rose over the same period, meaning drinking became cheaper. Estimates of how responsive alcohol purchasing is to price changes vary, but even the more conservative estimates indicate that declining prices account for most of the increase in alcohol consumption a year.
Alcohol has become more affordable because when federal taxes on the commodity were last set in 1991, they were done so in flat amounts, such as $1.07 a gallon for most wines and $18 per barrel of beer. Because of inflation, the impact of taxes on the affordability of alcohol has been waning in real terms ever since. Indeed, the biggest change to federal alcohol taxes Congress has made over the period has been to cut them for craft beer and spirit producers. (Many states also add taxes to alcohol, which vary greatly, but also have generally decreased in real terms over time.)
Many Americans instinctively bridle at the thought of tax increases, and it’s certainly fair of anyone to ask if the benefits of reduced alcohol consumption could possibly justify a higher tax. But that question’s answer is a clear yes.
Although many people don’t think of alcohol as an addictive and potentially deadly drug, the data attest otherwise. In 2020, there were some 99,000 alcohol-involved deaths in the U.S. In comparison, there were 68,630 from overdoses involving opioids and 19,480 involving 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 their perceptions of whether their assailant was under the influence of a drug, violent crime victims mention alcohol twice as often as all illegal drugs combined. Reduced alcohol consumption would thus almost certainly deliver large benefits not just to public health but also to public safety.
In fact, economists Phil Cook and Christine Durrance estimated that the rise in federal alcohol taxes in 1991, which produced a 6% increase in alcohol’s price, reduced traffic accidents, injuries and violent crime, saving 7,000 lives in that year alone. As most heavy drinkers are male and males commit some 80% of violent crimes, including spousal battery and rape, women likely experienced a particularly large safety benefit from the decreased alcohol consumption brought about by the tax increase.
It is often argued that excise taxes are regressive, meaning they fall heavily on the poor since they end up spending a higher portion of their income on them. But studies of alcohol taxes show that they are paid mainly by higher-income people, not least because lower-income people have the highest rate of abstention from alcohol, often for cultural or religious reasons.
The case for higher alcohol taxes is thus very strong and some advocacy groups are pushing vigorously for them. The politically mighty 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 become more than Americans can bear, political leaders can find the courage to put the public interest above corporate interest. When the new Congress convenes Tuesday and focuses on America’s addiction crisis, raising alcohol taxes should be at the top of its agenda.