The Senate Finance Committee (SFC) is considering partly funding health care reform with a booze tax. And while one of my Wonk Room colleagues calls the idea “plain bunk” because he is a “poor blogger,” my other colleague Matt Yglesias is a long-time booze tax enthusiast:

But what if we could raise some revenue by taxing something else? Like, say, cigarettes. Or soda. Or booze. Well, then the case for doing the taxing remains similar—you can fund useful programs with it. But the case against looks a lot weaker, since reducing consumption of cigarettes or soda is not so bad. You introducing a little bit of allocative distortion into the economy, but not a huge amount, and you’re improving public health which is going to be beneficial.

Indeed, the costs of alcohol use far exceed the revenue from existing alcohol taxes. In 2005, the federal government “pulled in about $8.9 billion from alcohol excise taxes.” By comparison, the economic and social costs of drinking burden “society with an estimated $184 billion per year in health care, criminal justice, social services, property damage, and loss of productivity expenses.” According to the Marin Institute, “annual health care expenditures for alcohol-related problems amount to $22.5 billion. The total cost of alcohol problems is $175.9 billion a year (compared to $114.2 billion for other drug problems and $137 billion for smoking)”:

- In comparison to moderate and non-drinkers, individuals with a history of heavy drinking have higher health care costs.

- Untreated alcohol problems waste an estimated $184.6 billion dollars per year in health care, business and criminal justice costs, and cause more than 100,000 deaths.

- Health care costs related to alcohol abuse are not limited to the user. Children of alcoholics who are admitted to the hospital average 62 percent more hospital days and 29 percent longer stays.

Currently, tax rates differ depending on the type of alcoholic beverage. This particular proposal would simplify the tax code by imposing “a rate of $16 per proof gallon on all alcoholic beverages.” As a result, “beer taxes would go up by 48 cents a six-pack, wine taxes would rise by 49 cents per bottle, and the tax on hard liquor would increase by 40 cents per fifth.”

How much revenue would this raise? Not enough to fully fund health care. According to a 2008 Congressional Budget Office report, “modestly increasing and reforming federal alcohol taxes could generate more than $28 billion in new revenue over five years. Resulting reductions in problem drinking would produce further significant savings in health care expenditures (for both the drinker and affected family members), and decreased law enforcement and other alcohol-related costs.”

Funding health care reform will require a mix of different revenue streams, but if the booze tax is seriously considered “poor bloggers” shouldn’t worry. According to the Center for Science in the Public Interest, since 80 percent of all alcohol consumers are moderate drinkers, they will pay “a negligible amount of alcohol taxes.” “Heavy and addicted drinkers, for instance – who account for most of the alcohol consumption in the U.S. – rightly pay most in taxes since their drinking imposes the greatest costs on society.” Here are the estimates:

- 35 percent of adults pay nothing at all.
- 80 percent of drinkers pay at most $26.50 per year, about 7¢ per day.
- Half of beer drinkers pay at most a penny a day.
- The heaviest drinkers (top 5%), who average some 11 beers per day, pay on average $215 a year, about 60¢ per day.

The main thrust of the Republican health care bill is an argument against greater government spending on health care. By completely repealing the employer-tax exclusion for health care benefits, they’re redistributing money already in the system and giving it to Americans in the form of refundable tax credits.

The argument is this: after the employer exclusion is repealed, employers will convert the money they spend on your health care benefits into higher wages and you’ll be able to use that increase and the ($2,290 per individual or $5,710 per family) refundable tax credit to purchase health care coverage in the new State Health Insurance Exchanges or the existing individual market.

Since everyone would have “universal access” to coverage, greater government involvement in health care would be counterproductive. Government rots the system, and Americans know this, they argue:

In solving our health care crisis, Americans already know that government will not work…Patients should be able to choose from a variety of private insurance plans. The Federal government would run a health care system — or a public plan option — with the compassion of the IRS, the efficiency of the post office, and the incompetence of Katrina.

Therefore, greater government involvement must not only be avoided, but existing government involvement should be phased out. Low-income families with dependent children should shift out of Medicaid and into “higher quality private plans through direct assistance that will be coupled with a tax credit.” Medicare Advantage — the program that contracts with private insurers — should be “reformed” and possibly expanded.

But today, the Commonwealth Fund released a new survey indicating that “elderly Medicare beneficiaries reported greater overall satisfaction with their health coverage, better access to care, and fewer problems paying medical bills than people covered by employer-sponsored plans.” “The findings bolster the argument that offering a public insurance plan similar to Medicare to the under-65 population has the potential to improve access and reduce costs,” the organization concluded:

- Medicare beneficiaries report easier access to physicians. Ten percent of Medicare beneficiaries’ physicians did not accept their insurance, compared with 17 percent of respondents with employer-sponsored plans.

- Medicare beneficiaries are less likely to report not getting needed services. Twelve percent of elderly Medicare beneficiaries reported going without care, such as prescribed medications or recommended tests, because of cost restraints. Of individuals with employer-based plans, 26 percent reported experiencing these cost/access issues.

- Medicare beneficiaries are sicker and poorer but report fewer medical bill problems.

Medicare beneficiaries were less likely to report a medical bill problem than those covered by employer plans.

Within our hybrid public-private system of coverage, public plans compliment private insurers — providing services to vulnerable populations more efficiently. Today, talk of “government-takeover” conjures up images of health care rationing in Great Britain or Canada. If, however, Democrats are able to shift the frame of reference to an expansion and improvement of Medicare, then they may very well win this debate.