Alcoholic beverage taxes, prices and drinking

Wagenaar et al.'s meta-analysis assessing the impact of price on drinking in this issue of Addiction is a true tour de force that will serve as an invaluable resource for researchers, public health practitioners, alcohol control advocates and policy makers for many years to come. Using state-of-the-art methods applied to a comprehensive set of English-language studies from economics and other social sciences, public health and other fields, they demonstrate clearly that higher alcoholic beverage taxes and prices reduce alcohol use. They find that this applies across beverages, with spirits and wine consumption more responsive to price than beer drinking, and that it applies to not only overall consumption, but also to measures of heavy drinking.These findings provide a strong rationale for using increases in alcoholic beverage taxes to promote public health by reducing drinking. Further support comes from the extensive literature that examines the relationships between alcoholic beverage taxes and prices and a variety of consequences of alcohol use and abuse. The Centers for Disease Control and Prevention estimate that excessive alcohol use resulted in 79 000 deaths annually in the United States from 2001 to 2005. In a recent study, Wagenaar and his colleagues found that the 1983 and 2002 alcoholic beverage tax increases in Alaska reduced alcohol-related disease mortality significantly, including deaths from liver cirrhosis, acute alcohol poisoning, alcohol-related cancers, cardiovascular diseases and others. In a series of studies, Markowitz et al. have shown that higher alcoholic beverage taxes and prices reduce violence, including spouse abuse, child abuse, suicide and other violent crime. Others have documented the reductions in fatal traffic crashes among youth, young adults and adults caused by alcohol that result from higher taxes and prices. Still others have shown that higher alcohol taxes and prices reduce other health consequences of alcohol use and abuse, including non-fatal work-place accidents , teenage pregnancy and the incidence of sexually transmitted diseases. At the same time, higher alcoholic beverage taxes and prices can improve educational outcomes among youths and young adults. In addition to the public health toll resulting from the morbidity, mortality and violence it causes, alcohol use and abuse impose substantial economic costs. The most recent estimates for the United States indicate that the economic costs of alcohol abuse were nearly $200 billion in 1998. Economists have shown that existing alcoholic beverage taxes fall well short of the costs that alcohol abusers impose on society. Despite the large and growing literature that higher alcoholic beverage taxes would reduce drinking and its consequences significantly, many governments are unwilling to raise these taxes. The stability of these taxes results in inflation eroding their value over time and, as a result, to declining real alcoholic beverage prices. In the United States, for example, rare federal tax increases and infrequent state tax increases have contributed to a sharp reduction in inflation-adjusted beer, wine and spirits prices over the past few decades. Given Wagenaar et al.'s findings on the relationships between prices and drinking, these falling prices have led to more drinking than would have been the case had taxes and prices kept pace with inflation and, as a result, greater consequences from alcohol abuse. This stands in clear contrast to cigarette taxes in the United States, which have risen sharply over the past two decades, raising inflation-adjusted cigarette prices and reducing significantly youth smoking initiation and leading many adult smokers to quit.The price elasticity estimates from Wagenaar et al.'s meta-analysis demonstrate that higher alcoholic beverage taxes can both reduce drinking and its consequences and raise new revenues for governments. The inelastic estimates they obtain for beer, wine, spirits and overall alcohol consumption imply that the quantity of alcohol consumed falls relatively less than price rises. For example, their estimated price elasticity of -0.44 for total alcohol means that a 10% increase in alcoholic beverage prices would reduce overall alcohol consumption by 4.4%. Given that alcohol beverage taxes account for only a fraction of the price of alcohol, relatively large increases in taxes will raise prices by a smaller percentage. If, for example, alcohol taxes account for one-quarter of alcoholic beverage prices, a doubling of the tax will raise the price by 25% (assuming that the tax is passed on fully to consumers). This price increase would reduce consumption by 11% while at the same time resulting in a nearly 80% rise in alcoholic beverage tax revenues.Perhaps the current economic downturn and resulting revenue needs of governments, coupled with the strong evidence-base on the benefits of higher taxes and prices reviewed thoroughly by Wagenaar et al. and others, will stimulate national and subnational governments to raise their alcoholic beverage taxes.