Taxing Booze to Pay for Health Care

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"Taxing Booze to Pay for Health Care"

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USA Today reports that we might see increased taxation on alcoholic beverages as a way to pay for health care:

Consumers in the United States may have to hand over nearly $2 more for a case of beer to help provide health insurance for all. [...] 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. Proceeds from the new taxes would help cover an estimated 50 million uninsured Americans.

The article is extremely unenlightening on the policy merits. Suffice it to say, however, that the real value of taxes on beer, wine, and liquor has declined substantially over the past fifty years. So an increase of this sort would not be an unprecedented burden on the American consumer, it would be more like a return to the level of taxation that existed a few decades ago. As I’ve said previously, I wouldn’t necessarily be enthusiastic about this sort of thing purely as a public health measure. But when you consider that universal health care is highly desirable and has to be paid for somehow, I think this is a pretty attractive way of going about it. The economic efficiency of this sort of tax is high, the public health benefits would be large. What’s more, the incidence would fall overwhelmingly on a relatively small number of problem drinkers (rather than the broad mass of people who drink moderately on social occasions) and the businessmen who profit off them, while the public health benefits from decreased drunk driving and alcohol-related violence would be broadly shared.

In technical terms, it seems to me that this proposal could be improved. For one thing, there’s no reason to tax beer, wine, and liquor all on separate scales. What we ought to do is tax the alcohol content of beverages. For another thing, it would be useful to take this opportunity to peg the tax level to inflation or take some other related step to avoid its real value from eroding over time.

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