Rising incomes and falling prices are the main driver of this trend. But one often-overlooked component is plummeting state and federal excise taxes on alcohol. Since 1951, Congress raised the excise tax on beer and wine exactly once, in the early 1990s. Liquor taxes received two modest bumps over the same period.
Since these taxes are levied by volume, inflation has steadily gnawed away at their real value over the past 60 years. The chart below tells that story in full. In 1951, the federal excise tax on a standard shot of 80-proof whiskey was about 90 cents in today's dollars. Today it stands at about 13 cents, a seven-fold decrease. The real federal beer tax has fallen about fivefold over the same period, with a more modest drop for wine.
From a public health perspective, alcohol taxes are important. "Quite simply, alcohol taxation and other measures that increase the price of ethanol are effective in promoting the public health and safety, " writes Duke University's Philip J. Cook in his 2007 book Paying the Tab. "Higher prices are conducive to lower rates of underage drinking, traffic fatalities, and sexually transmitted disease."
The logic here is simple. Higher taxes make alcohol more expensive. More expensive alcohol makes people drink less of it. And when people are drinking less, they're less likely to suffer costly health problems or do stupid things like drive drunk.
In 2009, Illinois raised its excise taxes on beer, wine and liquor. The tax rate for wine and liquor nearly doubled, while the beer rate rose by a more modest 25 percent. While steep in and of themselves, the tax hikes had a modest impact on retail prices of alcohol. Assuming that the full cost of the increase was passed to consumers, they would have raised the price of a standard drink of beer or wine by about a half cent, and of a shot of liquor by roughly 5 cents.
But when University of Florida researchers crunched these numbers along with federal traffic statistics, they found that even these modest price increases were enough to cause a significant drop in drunk driving fatalities. "Fatal alcohol-related motor vehicle crashes declined 9.9 per month after the tax increase, a 26 percent reduction," the conclude. The effect was even larger -- a 37 percent reduction -- for drivers under 30.
In looking at the data, the researchers controlled for other factors that affect crashes -- weather, traffic law enforcement, safety policies, etc. They also controlled for the economic effects of the Great Recession, and compared Illinois' numbers to Wisconsin's to ensure their results weren't confounded by broader regional factors.
Overall, if their numbers are right, Illinois' modest alcohol tax increases saved more than 120 lives per year from September 2009 through December 2011. Duke's Philip Cook is somewhat skeptical that the actual effect could be that large -- research he and others have done have found that "on average a 50 cent tax increase per 6-pack [of beer] results in a 4.5 percent reduction in traffic fatalities." He suspects that the Great Recession, which put a big dent in disposable income (and hence in alcohol consumption), may be playing a larger role in the Illinois numbers.
Still, there's no doubt as to the accuracy of the University of Florida researchers' overall conclusion: "higher alcohol taxes save lives," Cook says. Federal policymakers might want to consider this fact as they search for more palatable sources of revenue in the coming years.
Correction: An earlier version of this article incorrectly stated the strength of distilled spirits in the federal tax measurements. The taxes are for spirits at 80 proof strength, not 40 proof.