USA: Alcohol Taxes At Historic Low As Alcohol Harm Rises
Inflation has reduced American alcohol tax rates by 70% since 1933, according to a new study from Boston University School of Public Health (BUSPH) published in the Journal of Studies on Alcohol and Drugs. The trend is compounded by the decision of the Trump administration to cut taxes further for major alcohol producers in the United States.
In the United States, alcohol policy laws have been weakened over the years. During the coronavirus crisis this has been evident in the decision of most federal states to designate liquor stores as essential businesses. State and local governments also weakened alcohol laws regarding alcohol home delivery and takeout.
This has led to the alcohol industry seeing gains, not losses – despite the lockdown and closure of the on-trade sector. In fact, Nielsen figures show sales of beer, wine, and liquor increased as much as 53%. The alcohol industry is benefitting from the public health crisis due to the deregulation and weakening of alcohol laws and their aggressive activities to promote alcohol use during the pandemic.
I expect that pandemic bump will continue, because it’s common for alcohol sales to increase during times of economic hardship and stress,” says Jason Blanchette, a postdoctoral associate in health law, policy & management at Boston University School of Public Health.
Why shouldn’t the alcohol industry share in the pandemic pain?”
The Rise and Fall of Alcohol Excise Taxes in U.S. States, 1933–2018
Historic low of alcohol taxes in the United States
At the same time, alcohol taxes are at a historic low, according to a brand new study. Inflation has reduced the relative value of alcohol taxes, from when alcohol taxation began in the United States 1933 to 2018.
- For beer, the relative value of taxes declined by 66%;
- For wine, the relative value of taxes declined by 71%; and
- For distilled liquor, the relative value of taxes declined by 70%.
Alcohol taxes increased more or less in step with inflation until 1970, the study shows, when governments began raising most kinds of taxes less frequently, and by less. Throughout the 1970s, ’80s, and into the present, alcohol taxes have fallen further and further behind inflation.
Now, facing down the effects that COVID-19 will have on the economy and on state and federal budgets, Mr Blanchette says, revamped alcohol taxes could give governments much-needed revenue without raising taxes on suffering industries.
At the same time, Mr Blanchette notes, as per Medical Express, alcohol taxes have long failed to cover the money governments spend on dealing with the burden of alcohol harms.
Alcohol is notorious for costing government money, such as for first responders and medical costs to address domestic violence,” Blanchette says, pointing to a study he co-authored last year with Dr. Timothy Naimi, professor of community health sciences at BUSPH and a physician and alcohol epidemiologist at Boston Medical Center.
That study found that specific excise taxes accounted for 20.1% of total state alcohol tax revenue in the 32 license states and Washington, D.C. The median total alcohol tax per unit of alcohol was $0.21, which accounted for 26.7% of the cost to government and 10.3% of the total economic cost of alcohol harm. The researchers concluded that specific excise taxes account for one fifth of state alcohol taxes in the 32 license states; but even considering all tax types, total alcohol taxes account for only one tenth of alcohol-related costs.
Study findings
For the new study on taxes and inflation, the scientists looked at state tax rates for beer, wine, and distilled spirits from the end of Alcohol Prohibition in 1933 up through 2018, and analyzed these taxes’ relative values as the U.S. dollar shrank. In their analysis, researchers show:
- The average value of tax rates rose from 1933 to 1970, by 28% for beer, 5% for wine, and 8% for distilled spirits.
- After 1970, the average tax rate began declining.
- By 2018, the average tax rate was $0.31 per gallon of beer, but the 1933 tax would be $0.90 in 2018 dollars.
- The average 2018 tax per gallon of distilled spirits was $4.25, compared to a 1933 value of $13.95 in 2018 dollars.
- The average tax on a gallon of wine was $0.86 in 2018, whereas the 1933 rate in 2018 dollars was $2.91.
The researchers found that only 8% of specific alcohol taxes in 2018 had equal or greater values than at inception. More than two thirds of these taxes were less than half the inception value, and 17 states had beer taxes that were less than a fifth of the inception value.
… public revenue is badly needed for our economic recovery, and alcohol is one of those few non-essential products that legislators can safely tax during the pandemic,” says Jason Blanchette, a postdoctoral associate in health law, policy & management at Boston University School of Public Health, as per Medical Express.
The researchers emphasize that at current levels, any alcohol tax increase would not in fact be a tax hike but more of an “inflation adjustment, to correct the growing tax breaks the industry has been receiving for 50 years.”
U.S. Congress extends tax break for Big Alcohol
As recently as December 2019, the United States Congress extended the major tax break for the alcohol industry, losing billions of dollars in government revenue. Congress extended the tax break for beer, wine and distilled spirits which was initially approved in 2017.
- Without the tax breaks the Distilled Spirits Council (DISCUS) would have payed $275 million in higher taxes.
- A beer industry group claims they would have to pay $130 million in higher taxes.
- California fineries alone would have paid $150 million in higher taxes.
All this money is tax revenue being lost to the government which could have been invested in health and development of people and communities across the country that are seriously affected by rampant alcohol harm.
Contrary to communities’ needs, the Novel Coronavirus public health crisis is leading to quick changes to state alcohol laws across the United States. The alcohol industry has been swift and aggressive in pushing for the weakening of alcohol laws. This comes at a moment when COVID-19 and the alcohol harm epidemic are brewing a perfect storm of violence, injury and trauma, fueled by soaring online alcohol sales during the country’s lockdown, and exerting a heavy toll on the emergency care system that is already on the brink. Nevertheless, lawmakers and governors are weakening alcohol laws, protecting the interests of Big Alcohol.
