Alcohol taxes

There is strong evidence that increasing alcohol taxes reduces excessive alcohol consumption (CG-Alcohol, Wagenaar 2009, NBER-Saffer 2022) and alcohol-related harms (CG-Alcohol, Lavoie 2017, Wagenaar 2010). Alcohol consumption decreases when alcohol prices increase; effects have been shown for beer, wine, and spirits (CG-Alcohol, NBER-Saffer 2022, Wagenaar 2009, Giesbrecht 2016, Esser 2016). Higher alcohol prices, often achieved through tax increases, are also associated with lower levels of drinking among high school and college-age youth (CG-Alcohol).

Higher alcohol prices reduce alcohol-related harms such as alcohol-related motor vehicle crashes. Injuries and fatalities (CG-Alcohol, Lavoie 2017, Wagenaar 2010, Wagenaar 2015), and mortality from liver cirrhosis (CG-Alcohol). Lower state beer taxes are associated with higher prevalence of alcoholic liver disease across all age groups, and in particular middle-aged individuals with low socioeconomic status (Aslam 2021). Alcohol tax increases may also reduce violence (CG-Alcohol, Wagenaar 2010) and reduce sexually transmitted infections (STIs) (Wagenaar 2010, Staras 2014, Staras 2016). In states with higher beer taxes, male adults are less likely to report being physically harmed by someone who had been drinking (Trangenstein 2020). Furthermore, a study of beer excise taxes in five U.S. states finds tax increases are associated with reductions in firearm homicide rates in most cases (Tessler 2019). A Maryland-based study suggests that state alcohol tax increases are less effective in preventing alcohol-related offenses among underage populations than for adults (Smart 2018).

Alcohol taxes are most effective at reducing the amount of alcohol consumed by people who are considered heavy drinkers (NBER-Saffer 2022, Naimi 2016). An analysis of potential alcohol tax increases suggests excessive drinkers would pay almost three quarters of the revenue generated by such increases, and those with higher incomes and who are white would pay higher per capita costs (Naimi 2016).

Public health effects are expected to be proportional to the size of the tax increase (CG-Alcohol). Alcohol taxes have not substantially increased over the last several decades, resulting in an erosion in value due to inflation (Blanchette 2020, Naimi 2018). Experts suggest future legislation index alcohol taxes to inflation (Blanchette 2020, Naimi 2018) and prioritize beer taxes (IOM-Underage drinking 2004). Furthermore, revenue generated from alcohol taxes typically help address the costs of alcohol overuse, however revenue currently only covers about a quarter of the costs (Blanchette 2019). Findings from an Illinois-based study suggest tax increases on spirits and wine led to an increase in beer sales. Policymakers may want to increase alcohol taxes on all alcohol types by the same percentage (Gehrsitz 2021).

There is some evidence that alcohol taxes have the potential to decrease disparities in alcohol consumption and alcohol-related harms by income level (NBER-Saffer 2022, Meier 2016). However, it is unclear what impact alcohol taxes may have on racial and ethnic disparities.

People with low incomes may experience more health benefits from alcohol taxes since increased alcohol costs may lead to decreased alcohol consumption (Meier 2016). Additionally, alcohol consumers with lower incomes are more likely to experience alcohol-related harms than those with higher incomes (Meier 2016).

Alcohol taxes appear to change drinking behavior across racial and ethnic groups differently, with a greater impact on whites and the smallest impact among Hispanics (An 2011). The effects vary by the type of alcohol taxed. For example, higher beer taxes are associated with lower odds of any drinking among white women, and less beer consumed and lower odds of alcohol-related consequences among Black women. Higher spirits taxes are associated with less beer consumed by Hispanic men and women and less wine consumed by Hispanic women (Subbaraman 2020). Experts suggest further research is needed to understand how to address efficiency and equity in implementation of alcohol taxes to close disparities in alcohol-related harms (An 2011). An Illinois-based study suggests that alcohol tax increases may reduce sexually transmitted infections, particularly among non-Hispanic Blacks (Staras 2014).

Blacks and Latinos experience disproportionate personal and social consequences of alcohol use, including alcohol use disorder symptoms and various social problems, compared with other racial and ethnic groups when consuming similar levels of alcohol (Mulia 2017). Alcohol consumers who are Black or Hispanic appear more likely to experience alcohol-related injuries, accidents, and health and social consequences than consumers who are white. These racial and ethnic disparities are seen across all levels of consumption and may be most pronounced at low levels of consumption, suggesting there are environmental and cultural factors at play (Delker 2016, Witbrodt 2014). Evidence suggests that the combined effects of drinking cultures, historically rooted patterns of racial discrimination and persistent socioeconomic disadvantage in racialized groups contribute to these disparities (Vaeth 2017).

Alcohol taxation in the U.S. began in 1791. Alcohol taxes were used at the end of Prohibition in 1933 to offset federal deficits during the Great Depression, and eventually helped fund spending associated with World War II and the Korean War. Additionally, alcohol taxes have been levied to benefit public health to reduce excessive drinking and help cover the costs of alcohol-related societal harms. Federal alcohol excise taxes were last increased in 1991, then reduced in 2020 (CRS-Cilluffo 2021).

Alcohol is deeply rooted in American life and history. Prior to the American Revolution, alcohol was perceived as an invigorating and restorative beverage that did not spoil easily and was safer than water. Its taxation provided a major source of revenue for colonial governments (Olson 1985). After the American Revolution, the temperance and women’s rights movements shifted societal perspectives of alcohol and led efforts for its banishment. These efforts led to the adoption of the 18th Amendment in 1920, which banned the manufacture, sale, and transport of alcohol across the U.S., also known as Prohibition (Aaron 1981). Prohibition ended in 1933 in large part because of the need to generate tax revenue and stimulate job growth during the Great Depression and gave states authority to regulate alcohol, and each have approached regulation differently (Olson 1985). Today, the federal government has limited authority to impose national-level rules and regulations and there continues to be a patchwork of alcohol regulations that vary by state. Some state legislatures have preempted local government from implementing certain regulations and laws (APIS-State Preemption).

Throughout history, alcohol misuse was seen as a personal failing. This evolved over the 19th century as the addictive properties of alcohol were understood (Olson 1985). Alcohol use disorder is now seen as a chronic disease that is influenced by genetics, neighborhood disadvantage, stress, access to alcohol, drinking cultures and contexts, and alcohol-industry influences (Zapolski 2014, Sudhinaraset 2016).

The alcohol industry is viewed by public health and academia as legitimate partners in the development of national alcohol policy. Since the 1950s the alcohol industry has intervened and influenced research and policy to help normalize drinking, reproduce industry narratives regarding the causes of alcohol harms, and reduce regulation (Maani 2023). These attempts to influence public perceptions of alcohol have the potential to confuse public opinion about the health effects of alcohol, discredit independent scientists, damage the integrity of science, and discourage or delay implementation of effective alcohol policies (Babor 2013).

• Is there an alcohol tax in your community? If not, does your state preempt you from having a local alcohol tax?
• Is the alcohol tax implemented in your community effective in reducing the purchase and consumption of alcohol? How does it need to be altered to be effective?
• What other interventions, such as alcohol outlet density restrictions, could be paired with the alcohol tax to support positive change?
• Are you seeing substitution effects in your community? Is substitution higher amongst certain population groups (e.g., consumers with low incomes)? What steps can be taken, or interventions implemented, to reduce the potential for a substitution effect?

Alcohol tax rates vary by state and by type of alcohol. As of February 2023, state excise taxes range from $1.50 (MD, DC) to $14.27 (WA) per gallon of spirits, $0.20 (CA) to $2.50 (AK) per gallon of wine, and $0.02 (WY) to $1.29 (TN) per gallon of beer. Most states also levy sales taxes on spirits, wine, and beer (TPC-Alcohol tax 2023).

APIS - Alcohol Policy Information System (APIS). Welcome to the Alcohol Policy Information System.

TPC-Alcohol tax 2023 - State alcohol excise taxes on wine, beer, and spirits, 1982-2023. Washington, D.C.: Urban-Brookings Tax Policy Center (TPC); 2023.

* Journal subscription may be required for access.

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