Taxes Are Not a Sober Response to Alcohol Abuse

Increasing sin taxes on alcohol is bad for consumers and state budgets.

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On the heels of a recent Centers for Disease Control and Prevention study that sent shockwaves through the media by declaring that alcohol abuse costs America more than $200 billion in "lost productivity" each year, a task force is recommending that states increase taxes and restrictions on alcohol sales. Although the CDC's numbers look scary, the science behind them is even scarier, and new sin taxes would be a gross overreaction to some questionable data.

The CDC study at the center of the uproar relies on lost productivity metrics, a dubious field of statistics that many analysts believe grossly overstates the impact of common behaviors. By these same measures, "disengaged employees" cost the economy about twice as much as alcohol abusers, and parents pull more than $300 billion from the economy when they are stressed about child care.

Instead of taking these statistics with a grain of salt, the CDC's "Community Preventative Services Task Force" seized on the opportunity to make recommendations – including raising alcohol taxes, restricting weekend sales, opposing privatization of liquor stores and tightening regulations on where alcohol can be sold – that empower government bureaucrats and reduce consumer choice.

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Nevertheless, should state lawmakers follow these recommendations, they're likely to be highly disappointed with the results. New taxes and restrictions on alcohol sales would do little to reduce consumption in general, and certainly not among the drinkers who are causing economic problems. Research by the National Institute on Alcohol Abuse and Alcoholism has found that hardcore alcohol abusers are affected little by increases in price, which have a greater effect on light and moderate drinkers. Additionally, studies show that beer taxes have an insignificant effect on underage drinking.

By targeting responsible adults instead of addicted alcoholics and underage drinkers, the CDC's proposed laws miss the point. Those most likely to be dissuaded from purchasing alcohol under these laws are the people least like to abuse it.

Interest groups often package "sin taxes" on alcohol, tobacco, and other products as a win-win that disincentivizes substance abuse and raises revenue, but it's a precarious way to balance a budget. When a government hikes sin takes, it increases its own dependence on the very products it intends to discourage. Taxes on alcohol also regressively target the poor, increasing the tax burden on those who can least afford to pay.

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Furthermore, while the term "alcohol smuggling" may trigger images of Prohibition-era bootleggers, it could become a very real problem in the 21st century if states decide to slap higher taxes on liquor. In Washington state, which has the fifth-highest tobacco tax in the nation, more than one-third of cigarettes are smuggled in from bordering states, leading to hundreds of millions of dollars in lost revenue each year. States that hike alcohol taxes and tighten regulations only encourage consumers to look out of state to skirt the tax, to the detriment of local retailers.

Sin taxes are a tired crutch for state and local governments that face both budgetary and public health crises, but lack the innovation to develop real solutions for either. Alcoholism is a medical condition, and trying to cure this disease by taxing liquor would be like trying to cure diabetes by taxing sugar. Instead, states should pursue strategies that target the problem drinkers instead of the drinks themselves.

An alcohol tax may look like a one-size-fits-all solution to raise revenue and cut back on the damages done by substance abuse, but in practice, it's a bad deal for consumers and state budgets alike.

Jason Stverak is President of the Franklin Center for Government and Public Integrity.

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