Tax Cheap Drinks

Rarely do governments in the U.S. attempt to control drinking by raising prices. Price increases (Read: Taxes) are usually instituted raise revenue in general. But this isn’t the case around the globe. Often times tax hikes on alcohol are instituted to decrease drinking in general.

Now the BBC reports that the US Prevention Research Center looked at alcohol sales in Sweden between 1984 and 1994 and found that tax increases do not necessarily reduce drinking. In fact, the study found that taxes on alcohol that occurred across the board actually led to an increase in drinking as people simply looking for cheaper alternatives.

But here’s the kicker. When taxes were raised on less expensive alcohol products only, consumption did decrease.

Makes sense.

Though I’m not totally educated on the issue, I don’t think there is much taxing going on in America aimed at lowering consumption in general and if it were, it would be interesting to hear the arguments for only raising taxes on cheap drinks were some state to pick up on this study.

Here in America, we are more apt to see calls for increased taxes to raise revenue either to fill state coffers in general or to be used to fight the costs of alcohol abuse. I’m not particularly opposed to that type of taxing, assuming it’s not really massive a la tobacco.

Posted In: Culture and Wine


2 Responses

  1. Bradley - January 5, 2006

    I recall running across an extensive examination of Sweden’s attempts to manage alcohol consumption that sourced records centuries old.
    Some of the measures brought on by the old rulers were more than draconian; at times alcohol was outright banned.
    During these times, incidents of alcoholism and related injury actually went up as the poor peasants cooked up their own moonshine and poisoned themselves in ever greater numbers. It also messed up their food supply as much of the harvest went to illegal (profitable) booze production.
    On the other hand, when booze (mostly vodka from spuds) was too cheap and plentiful they had plenty of problems too.
    There needs to be a balance.
    Raise taxes to address social problems but don’t fool ourselves into thinking that more tax will equal less consumption. Higher taxes just means a certain part of the population will do an end run around authority and produce what they want and evade any tax at all.
    And if your government wants to help the victims of alcoholism with a new tax – make sure it doesn’t disappear into general revenue. It’s a cash cow.

  2. Justin - January 6, 2006

    This should come as a big surprise to no one. A vast majority of society’s ills are disproportionately present among the lower financial stratum. One could get a PhD writing about why this is and he/she would still be wrong. It’s just one of those things.

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