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The deadly consequences of a cut in the beer tax

Making this cheaper could have dangerous consequences. (Hill Country Barbecue Market)
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It's not every day that a bill dealing with taxes is introduced with as many Republicans on board as Democrats. But the Brewers Excise and Economic Relief Act of 2013 (or BEER Act for short) qualifies. Co-sponsored by Reps. Tom Latham (R-Iowa) and Ron Kind (D-Wis.), the act would halve the excise tax on beer, currently set at $18 a barrel, taking rates back to where they were in 1990, before the last increase in the tax took effect.

It would also reduce the tax on small brewers. Currently, breweries producing less than 2 million barrels a year pay a reduced tax of $7 a barrel on the first 60,000 barrels they produce. The BEER Act would eliminate the tax for the first 15,000 barrels, and reduce it to $3.50 for barrels 15,001 to 60,000. Above that it would be $9 a barrel, half the current rate, for both small and large brewers. This would widen the gap between beer and spirit taxes. As the CBO has explained, spirits are taxed at about 21 cents an ounce of alcohol, beer at 10 cents an ounce and wine at 8 cents an ounce.

The bill has 33 sponsors, 17 Republicans and 16 Democrats, spanning the ideological spectrum from libertarian-leaning Rep. Tom Massie (R-Ky.) to progressives like Rep. Rush Holt (D-N.J.). A more modest bill, to cut the $7 rate for small brewers' first 60,000 barrels in half and institute a lower $16-a-barrel rate for small brewers who produce more than that, has 79 co-sponsors in the House and 16 in the Senate.

But public health research suggests that both plans are bad ideas. Annoying as they may be for responsible drinkers, alcohol taxes really do save lives.

Ironically, the proposal to go back to 1990-era beer tax rates comes shortly after a major new evaluation of the 1990s rate hike was released. In a paper for the Journal of Health Economics, Duke's Philip Cook and UNC's Christine Piette Durrance find that the increase that took effect Jan. 1, 1991, raised alcohol prices by about 6 percent. That, in turn, caused a 4.5 percent reduction in injury deaths in 1991, including traffic accidents, homicides and suicides. That represents 6,480 lives saved in just that one year. It also caused statistically significant decreases in aggravated assault, robbery and violent crime overall.

Sara Markowitz, an economist at Emory University, has found similar results. "Most of the research that I've done links alcohol taxes, primarily beer taxes, to social outcomes such as violence and crime," she says. "I find that higher taxes are associated with improved outcomes." One of her studies found that a 1 percent increase in the beer tax reduces one's probability of being assaulted by 0.45 percent. More recent research of hers backs that up. She and co-authors Erik Nesson, Eileen Poe-Yamagata, Curtis Florence, Tracy Roberts and Sarah Beth Link conclude, "Our overall conclusion from this paper is that increases in the beer price are by far the most effective of all the alcohol control policies to reduce violence."

A meta-analysis by University of Florida researchers Alexander Wagenaar, Amy Tobler and Kelli Komro finds that most studies support Cook and Markowitz on this. They conclude: "Our results suggest that doubling the alcohol tax would reduce alcohol-related mortality by an average of 35%, traffic crash deaths by 11%, sexually transmitted disease by 6%, violence by 2%, and crime by 1.4%."

Skeptics of alcohol taxes sometimes argue that problem drinkers won't be deterred by high prices. That's just not true, Cook says. The death rate from liver cirrhosis, for example, falls when alcohol prices rise. You have to drink a whole lot for a very long time to be at risk of dying from liver cirrhosis, so that suggests that even the most alcohol-dependent drinkers are responding to prices.

Further evidence comes from experiments in treatment centers (e.g. here), where researchers offered alcoholics in treatment drinks if they completed menial tasks, like turning a crank, but varied the price. "There's no question that the alcoholics were less likely to get the drink if you doubled the price," Cook says.

What's more, alcoholics aren't the only cause of social damage due to alcohol usage. "A lot of the damage that excess drinking does is not by people who are alcoholic, it's just by people who drink too much and got into a wreck, or got into a fight," Cook explains.

This evidence, taken together, suggests very strongly that cutting the beer tax, especially as dramatically as the BEER Act could cut it, would probably cause thousands of excess deaths, relative to keeping it where it is.

And keeping it at current levels is actually tantamount to cutting it, as the tax isn't indexed to inflation. "$18 a barrel turned out to be a nickel a drink, and inflation since then has eroded the value of that nickel down to less than three cents," Cook says. "We're almost back to 1990 even without any new legislation, in real terms." And if the BEER Act passes? "That would put it much lower than 1990, or any time previous in history, going back to the 19th century," Cook says. "With the obvious exception of Prohibition."