The other day I wrote a not-very-popular post making the point that a higher tax on alcohol would be a boon to public health and crime control, a way of raising some revenue that would provide a net boost to the economy rather than a drag like an income tax. Thinking more about this, it’s worth observing that our current low-tax environment has hardly created a free market in intoxicating beverages. On the contrary, getting your drink on is—at the retail level—one of the most regulated enterprises in everyday life.
Just about everywhere, you need a special license of some kind to see booze. In many states, you can only buy liquor from state-run monopolies. In Pennsylvania, you can’t buy beer in stores. In New York, you can’t buy beer in liquor stores. Here in DC there’s a tendency for very mediocre drinking establishments to be incredibly crowded simply because there are immense regulatory hurdles to opening a new bar. And read Radley Balko on the evils of beer distributors.
All these rules and regulations add up to alcoholic beverages being more expensive and more inconvenient to obtain than they would be in a less-regulated world. But whereas with a tax on alcohol the government would get its hands on revenue that could be spent on valuable social services, the increased cost associated with these regulations is just an overall loss. As for whether or not it makes sense to try to increase the retail price of booze, that’s neither here nor there. But insofar as we’re doing something in this neighborhood I would much rather act through taxes than through scattershot and arbitrary regulatory schemes.