Why ‘Poor Bloggers’ Shouldn’t Worry About A Booze Tax

Posted on



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.