This Tax's for You

Some of the evidence that alcoholic beverages prices influence the prevalence and social costs of alcohol abuse is reviewed. The focus is on youths since it is this group that is most prone to abusing alcohol and that suffers a disproportionate share of the adverse consequences of abuse. Since most youthful alcohol consumption is in the form of beer, the particular concern is documenting the effects of raising the federal and state beer excise taxes. In the search for the effective policy instruments to reduce the social cost of alcohol abuse, excise taxes represent an attractive option that is currently under used. State and federal taxes on alcoholic beverages are substantially lower than warranted by the negative external costs of consumption. The implicit policy of Congress and most state legislatures has been to allow inflation to erode the real value of alcohol taxes, and both taxes and prices are substantially lower now than in the 1970s and earlier.

Duke Scholars

Author Philip J. Cook Sanford School of Public Policy