For years, experts have been calling on Congress to raise the alcohol tax on public health grounds. “Higher alcohol taxes save lives,” as Duke University's Philip Cook summed it up in 2015. But the lawmakers behind the Senate's tax bill have decided instead to lower it even further.
Those cuts “will lead to more drinking and thus more alcohol-related deaths and violence,” according to the Brookings Institution's Adam Looney.
Looney analyzed the existing literature on the relationship between alcohol taxes and alcohol-related mortality and came up with this sobering estimate: If enacted, the Senate alcohol-tax cuts would cause 1,550 additional alcohol-related deaths each year.
The math on this is simple: Study after study has shown that when alcohol taxes go up, the mortality rate goes down. A comprehensive 2010 meta-analysis of 50 studies on the relationship between alcohol taxes and alcohol deaths found that “doubling the alcohol tax would reduce alcohol-related mortality by an average of 35%.”
Why do higher alcohol taxes save lives? Because when alcohol is more expensive, people drink less of it.
“A large literature establishes that beverage alcohol prices and taxes are related inversely to drinking,” a 2010 analysis concluded. “Price affects drinking of all types of beverages, and across the population of drinkers from light drinkers to heavy drinkers.”
Conversely, cutting federal alcohol taxes — as the Senate bill does — will cause more people to die.
Revenue aside, the true benefit of the federal alcohol tax is that it helps offset the social costs of drinking, what economists call the “negative externalities.” In the case of booze, those social costs include not just alcohol-related deaths (88,000 of them each year, according to the Centers for Disease Control and Prevention), but also injury, domestic violence, other crime and lost productivity due to intoxication.
The total price of those externalities works out to about $45 per proof gallon (one gallon of 100-proof liquid) of alcohol in today's dollars, according to Looney, citing prior research. “By comparison, under current law, the federal tax per proof-gallon is $13.50 for distilled spirits, $4.84 for beer, and $4.27 for most wine,” he writes.
The Senate bill would dramatically lower those taxes in some cases. The tax for distilled spirits, for instance, would fall from $13.50 per proof gallon to $2.70 per proof gallon for the first 100,000 gallons produced. The excise tax on beer would fall from $18 per barrel to $16 per barrel for the first 2 million barrels produced. Wine taxes would be reduced as well.
The measures are intended as a stimulus for craft brewers, vintners and distillers. But producers would be able to take advantage of the tax breaks on initial product runs, regardless of size. Overall, the Joint Committee on Taxation estimates the bill would save the alcoholic beverage industry $4.2 billion in taxes before the provision expires in 2020.
According to Looney's estimate, 3,100 people will die as a result of the tax cuts over the same period.