Beer Consumption and Taxes/Alcohol Taxes

Beer accounts for 67 percent of the alcohol consumption reported in the United States.

Beer is consumed by the highest 10 percentile of drinkers by volume represents 42 percent of the reported alcohol consumed in the United States.

Beer accounts of over four fifths (81 percent) of all the alcohol that is reported drunk in hazardous amounts in the United States.

In the United States, beer is disproportionately consumed in hazardous amounts (i.e., five or more drinks per occasion) relative to wine and spirits.

Nearly 82 percent of adults favor an increase of five cents per drink in the tax on beer, wine, or liquor to pay for programs to prevent minors from drinking and to increase alcohol treatment programs.

Alcohol excise tax rates have rarely been increased to compensate for the effects on inflation. As a result, "real" tax rates have declined over most of the postwar period. This erosion of real tax rates has contributed to overall declines in real beverage prices over time.

In 1998, the estimated economic cost of alcohol abuse in the United States exceeded $184 billion. the cost is equivalent to roughly $683 for every man, woman and child living in the United States.

The cost to Americans of underage drinking totals nearly $53 billion, equivalent to $20 per man, woman, and child in the United States.

Each year, the federal government spends between $900 million and $1 billion on alcohol prevention services for people of all ages, less than 2 percent of the annual cost of alcohol use by youth alone.

According to the Bureau of Alcohol, Tobacco and Firearms, federal excise tax collections for alcoholic beverages totaled more than $8 billion in 2000. Put into perspective, this amounts to just over 4 percent of the $184 billion in alcohol-related costs experienced by the American public.

Califano, Joseph A., Jr.; "Teen tipplers: America's underage drinking epidemic," National Center on Addiction and Substance Abuse, Columbia University (February 26, 2002). "Children under the age of 21 drink 25 percent of the alcohol consumed in the U. S. Drinking beer is teen America's fatal attraction. Underage drinkers are a critical segment of the alcohol beverage market. Individuals who do not drink before age 21 are virtually certain never to do do: 82.8 percent of adults who drink had their first drink of alcohol before age 21. In 1998, they accounted for $27 billion of the $108 billion spent on alcohol, including as much as $15 billion on beer. Without underage drinkers, the alcohol industry, and the beer industry in particular, would suffer severe economic declines and dramatic loss of profits."

Center for Disease Control
Impaired driving facts
Address: http://www.cdc.gov/Motorvehiclesafety/index.html

Chaloupka, Frank J.; Grossman, Michael; Saffer, Henry; "The effects of price on alcohol consumption and alcohol-related problems", ALCOHOL RESEARCH AND HEALTH, 26 (1).

"Cheap beer and STDs", Cheap beer prices may a have direct effect on increases in sexually transmitted disease (STD) among young people, according to a report from the Centers for Disease Control and Prevention.

Every time beer taxes go up or the legal drinking age is raised, gonorrhea rates usually dropped among young people, according to Alcohol Policy and Sexually Transmitted Disease Rates --United States, 1981--1995 published April 28, 2000 by the CDC.
About.com http://alcoholism.about.com/cs/teens/a/aa000429.htm

"Economic perspectives in alcoholism research," ALCOHOL ALERT (January, 2001), 51. (Economic analysis is used to estimate the costs of alcohol abuse and alcoholism. Based on 1992 data, researchers estimate 45 % of costs was borne by alcohol abusers and their families, 20% by the Federal Government, 18% by State and local government, 10 % by private insurance companies, and 6% by the victims of alcohol-related crashes. Higher taxes on alcoholic beverages have been linked to lower traffic fatality rates.) Address: http://pubs.niaaa.nih.gov/publications/aa51.htm

Elder, R. W.; Lawrence, B.; Ferguson, A.; Naimi, T. S.; Brewer, R. D., Chattopadhyay, S. K.; Toomey, T. L.; Fielding, J. E.; "The effectiveness of tax policy interventions for reducing excessive alcohol consumption and related harms", THE AMERICAN JOURNAL OF PREVENTIVE MEDICINE (2010); 38 (2): 217-29. "A systematic review of the literature to assess the effectiveness of alcohol tax policy interventions for reducing excessive alcohol consumption and related harms was conducted for the Guide to Community Prevention Services (Community Guide). Seventy-two papers or technical reports, which were published prior to July, 2005, met specific quality criteria, and included evaluation outcomes relevant t public health (e. g., binge drinking, alcohol-related crash fatalities), were included in the final review. Nearly all studies, including those with different study designs, found that there was an inverse relationship between the tax or price of alcohol and indices of excessive drinking or alcohol-related health outcomes. Among studies restricted to underage populations, most found that increased taxes were also significantly associated with reduced consumption and alcohol-related harms. According to Community Guide rules of evidence, these results constitute strong evidence that raising alcohol excise taxes is an effective strategy for reducing excessive alcohol consumption and related harms. The impact of a potential tax increase is expected to be proportional to its magnitude and to be modified by such factors as disposable income and the demand elasticity for alcohol among various population groups."

The most fundamental low of economics links the price of a product to the demand for the product. Accordingly, increases in the monetary price of alcohol (i.e., through tax increases) would be expected to lower alcohol consumption and its adverse consequences. Studies investigating such a relationship found that alcohol prices were only one factor influencing alcohol consumption among youth and young adults. Other studies determined that increases in the total price of alcohol can reduce drinking and driving and its consequences among all age groups; lower the frequency of disease, injuries, and deaths related to alcohol use and abuse; and reduce alcohol-related violence and other crime.

Given the evidence, increases in the prices of alcohol beverages appear to be an effective policy for reducing alcohol consumption and its consequences. In reality, however, alcoholic beverage prices have declined relative to the prices of other goods and services for most of the past 50 years. This price decline is the result in large part of the infrequent and relatively small changes in Federal and State taxes. Based on the evidence presented here, it appears likely that this decline in real prices has kept alcohol consumption and many of the problems associated with alcohol use and abuse at levels higher than they would otherwise be.

Elliott, Victoria Staff, "Vigilance urges for patients' lifestyle choices : AMA policy signals a renewed commitment to fight smoking, obesity and underage drinking." AMNEWS, July 7, 2003. "We have allowed companies to create an entire subclass of our society that are neurochemical slaves," said William P. Giffons, MD, a pathologist from Aurora, Ill. and a delegate from the Organized Medical Staff Section.

The AMA will "work to create a higher level of awareness about the harm caused by underage drinking and encourage more research in this area. Taxes on tobacco and alcohol should be increases to fund health care and health education."

Foster, Susan E.; Vaughan, Roger D.; Foster, William H.; Califano, Joseph A.; "Estimate of the commercial value of underage drinking and adult abusive and dependent drinking to the alcohol industry", ARCHIVES OF PEDIATRICS AND ADOLESCENT MEDICINE (May, 2006). Underage drinkers and adult pathological drinkers (those that meed the clinical DSM-IV criteria for alcohol abuse or addiction) consume between 37.5 percent and 48.8 percent of the value of all alcohol in the United States. $22.5 billion in consumer spending on alcohol came from underage drinking and $25.8 billion came from adult pathological drinking. Other findings include: Alcohol abuse and addiction cost the nation an estimated $220 billion in 2006 - more than cancer ($196 billion and obesity ($133 billion). Each day more than 13,000 children and teens take tier first drink. The 25.9 percent of underage drinkers who are alcoholics and alcohol abusers consume 47.3 percent of alcohol drunk by underage drinkers. The 9.6 percent of adult pathological drinkers consume 25 percent of alcohol drunk by adult drinkers. Children and teens that begin drinking before age 15 are four time likelier to become alcohol dependent that those who do no drink before age 21.
http://archpedi.ama-assn.org/cgi/content/full/160/5/473

Greenfield, Thomas K.; Rogers, John D.;"Who drinks most of the alcohol in the U. S. The policy implications," JOURNAL OF STUDIES ON ALCOHOL (1999), 60 (1): 78-89. " Number of respondents 7,049, 4,784 drinkers. Men were over represented at the highest volumes, contributing about 78% of the country's total reported consumption. Similarly, young adults aged 18 to 29 are disproportionately represented in the heaviest drinking levels. Conclusions: the bulk of the alcohol reported drunk in the U. S. is consumed by a relatively small population of very heavy drinkers. Prevention policies implied by this concentration include strengthening social norms, discouraging heavy consumption, restricting marketing practices that target heavy drinkers, and implementing measure to reduce consumption by the heavies drinkers."

Gruenewald, Paul J.; Ponicki, William R.; Holder, Harold D.; Romelsjo, Anders; "Alcohol prices, beverage quality and the demand for alcohol: quality substitutions and price elasticies", ALCOHOLISM: CLINICAL AND EXPERIMENTAL RESEARCH (2006), 30 (1): 96-105. "Background: Although the published literature on alcohol beverage taxes, prices, sales and related problems treats alcoholic beverages as a simple good, alcohol is a complex good composed of different beverage types (i.e,, beer,wine, and spirits) and quality brands (e.g., high-medium-, and low-quality beers). As a complex good, consumers may make substitutions between purchases of different beverage types and brands in response to price increases. For this reason, the availability of a broad range of beverage prices provides opportunities for consumers to mitigate the effects of average price increase through quality substitutions; a change in beverage choice in response to price increase to maintain consumption.

Methods: Using Swedish price and sales data provided by systembolaget for the years 1984 through 1994, this study assessed the relationship between alcohol beverage prices, beverage quality, and alcohol sales. The study examined price effects on alcohol consumption using seemingly unrelated regression equalitators to model the impacts of price increases within 9 empirically defined quality classes across beverage types. The models enabled statistical assessments of both own-price and cross-price effects between types and classes.

Results: The results of these analyses showed that consumers respond to price increases by altering their total consumption and by varying their brand choices. Significant reductions in sales were observed in response to price increases, but these effects were mitigated by significant substitutions between quality classes.

Conclusions: The findings suggest that the net impacts of purposeful price police to reduce consumption will depend n how such policies affect the range of prices across beverage brands.

Gruenewald, Paul J., Remer, Lillian; Lipton, Rob; "Evaluating the alcohol environment: community geography and alcohol problems", ALCOHOL RESEARCH AND HEALTH, 25 (4). Mapping alcohol assaults, drunk driving, on and off premises establishments and schools.

Hollingworth, William; Ebel, Beth E; McCarty, Carolyn A.; Garrison, Michelle M.; Christakis, Dimitria A.; Rivara, Frederick P.; "Prevention of deaths from harmful drinking in the United States: the potential effects of tax increases and advertising bans on young drinkers<" JOURNAL OF STUDIES IN ALCOHOL (2006), 67:300-308. Interventions to prevent harmful drinking by youth can result in reductions in adult mortality. Among interventions shown to be successful in reducing youthful drinking prevalence, advertising bans and tax increased were the most effective interventions identified. A tax-based 17% increase in the price of alcohol of $1 per six pack of beer could reduce deaths from harmful drinking by 1,490, equivalent to 31,130 discounted years of potential life save or 3.3% of current alcohol-attributed mortality. A complete ban on alcohol advertising would reduce deaths from harmful drinking by 7,609 and result in an a 16.4% decrease in alcohol-related life-years lost.

Ponicki ,W. R.; Gruenewald, P. J.; LaScala, E. A.; "Joint impacts of minimum legal drinking age and beer taxes on US youth traffic fatalities, 1975 to 2001;" ALCOHOLISM: CLINICAL AND EXPERIMENTAL RESEARCH (2007), 31(5): 804-13. "There is considerable research which indicates that a number of public policies limiting alcohol availability affect youth traffic fatalities. These limitations can be economic (e.g., beverage taxation), physical (e.g., numbers or operating hours of alcohol outlets), or demographic (e.g., minimum legal drinking age). The estimated impacts of these policies differ widely across studies. A full-price theoretical approach suggests that people weigh the benefits of drinking against the sum of all the associated costs, including the price of the beverages themselves plus the difficulty of obtaining them and any additional risks of injury or punishment related to their use. This study tested one prediction of this model, namely that the impact from changing one availability-related cost depends on the level of other components of full cost. RESULTS: The analyses showed that raising either MLDA or beer taxes in isolation led to fewer youth traffic fatalities. As expected, a given change in MLDA causes a larger proportional change in fatalities when beer taxes are low than when they are high. CONCLUSIONS: These findings suggest that a community's expected benefit from a proposed limitation on alcohol availability depends on its current regulatory environment. Specifically, communities with relatively strong existing policies might expect smaller impacts than suggested by prior research, while places with weak current regulations might expect larger benefits from the same policy initiative."

"Shoveling up II: The Impact of Substance Abuse on Federal, State and Local Budgets". National Center on Addiction and Substance Abuse at Columbia University (New York, New York). May 2009.

Key 2005 findings of the report are:
For every dollar federal and state governments spent to prevent and treat substance abuse and addictions, they spend $59.83 in public programs shoveling up its wreckage.

If substance abuse and addiction were its own state budge category, it would rank second just behind spending on elementary and secondary education.

If substance abuse and addiction were its own budget category at the federal level, it would rank sixth behind social security, national defense, income security, Medicare and other health programs including the federal share of Medicaid.

Federal and state governments spend more that 60 times as much to clean up the devastation substance abuse and addiction visits on children as they do on prevention and treatment for them--notes from Joseph A. Califano. Check out the entire article at: http://www.casacolumbia.org/addiction-research/reports/shoveling-ii--impact-substance-abuse-federal-state-and-local-budgets
On this page you may search the library for the Shoveling It Up I and II reports.

Wagenaar, A. C.,, et al.; "Effects of beverage alcohol price and tax levels on drinking: a meta-analysis of 1003 estimates from 112 studies." ADDICTION, 15 Jan, 2009. A meta-analysis of 112 studies examined the effects of increases in alcohol pricing or tax level on consumption of alcoholic beverages. The study finds that raising the cost of alcohol effectively reduces drinking across the broad population of drinkers.

Substantial literature over several decades has examined the relationship between alcohol cost and consumption, yet these studies' methodologies and interpretations differ significantly. This study systematically reviews this vast and varied literature. It cumulates evidence across 112 studies based on 1,003 statical estimates, using a multilevel random-effects model to account for study-level variability.

Key findings:
--There is a highly significant inverse relationship between alcohol tax or price measures and indices of sales or consumption of alcohol.
--Alcohol cost affects drinking of all types of alcoholic beverages across the entire population of drinkers from light drinkers to heavy drinkers.

Given the low cost of adjusting alcohol tax policies, the global burden of disease and injury associated with alcohol, and the high fiscal and social costs of alcohol-related problems, this study's noteworthy evidence should encourage public policies that raising the price of alcohol may effectively reduce drinking. Future studies might examine price/tax effects on a range of relevant health and social outcomes.

Young, Douglas, J.; Bielinska-Kwapisz, Agnieszka; "Alcohol consumption, beverage prices and measurement error", JOURNAL OF STUDIES ON ALCOHOL (2003) 64: 235-238. Conclusion: The AACRA (American Chamber of Commerce Researchers Association) price data are substantially contaminated with measurement error, but using state and federal taxes as instrumental variables mitigates the problem.

updated 12/12/16