Why raise alcohol excise taxes?
In most states, alcohol taxes have not increased in decades and their value has dwindled with inflation. Dormant
tax rates have also contributed to a gradual and substantial decline in the price of alcoholic beverages.
According to the National Institute on Alcohol Abuse and Alcoholism (NIAAA), lower prices on alcohol are
associated with increased levels and frequency of drinking, particularly among underage persons. Aside from
providing a source of new revenue, increasing taxes on alcohol will deter underage use, reduce traffic-crash
fatalities and certain crimes, and decrease alcohol-related health problems such as cirrhosis.
In some states, the new revenue may be available for public health and safety programs to enforce liquor laws,
prevent teen drinking, provide treatment for alcoholism or support traffic safety.
In most states, even small increases in taxes - pennies per drink - would translate into significant new revenues.
These revenues take on more importance these days, as many states struggle to overcome budget deficits.
The Federal Front
Issue in Focus: Health Care for Children or Tax Breaks for Big Beer?
Congress faces tough choices as lawmakers seek to maintain budget discipline and find resources to fund the
State Children’s Health Insurance (S-CHIP) and other essential health care programs. Alcohol excise tax
increases represent one well-justified and available source of revenue. Taxes on alcohol are low and long
overdue for increases (the last one occurred in 1991). They do not impose much of a burden (if any) on the
vast majority of consumers, and they can provide a source of significant revenue - both to meet budget needs
and to help reduce the harmful effects of alcohol use.
Resources:
Federal Alcohol Excise Tax Basics
The Case for Alcohol Excise Tax Increases
Coalition Letter Supporting an Alcohol Tax Increase
Those Incredibly Shrinking Alcohol Excise Taxes
Sample Proposals for Increasing Excise Taxes
Responses to Misleading Industry Propaganda
Addressing Regressivity: Do Higher Alcohol Taxes Really Hurt Lower Income People?
Press Release: Noted Economists Support Higher Taxes on Alcoholic Beverage
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Sample State Reports
These reports have been developed as examples of background material for public health advocates, political
activists, legislators and legislative staff, state and local officials, and journalists. They cover different scenarios
for increasing alcohol taxes for the following states.
2004 Reports
Alabama, March 2004
Connecticut, March 2004
Maryland, March 2004
2003 Reports
California, March 2003
New Mexico, October 2003
2002 Reports
Maryland, November 2002
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Calculating the Effects of Alcohol Tax Increases
CSPI has developed this alcohol tax calculator to assist public health advocates, political activists, legislators
and legislative staff, state and local officials, and journalists in estimating how increasing state alcohol excise tax
rates will affect state revenue and alcohol consumption.
License states, in which alcohol is sold by private retailers, impose alcohol excise taxes at the wholesale level.
However, in control states, where state-controlled stores sell alcohol, a percentage markup is added onto the
wholesale price of alcohol. This tax calculator considers only the situation in license states.
See if your state is a control state or a license state.
The calculation we propose assumes that any tax increase would be marked up at least 7.5%. In fact, prices
might go even higher. Other factors that might affect the outcome, which are not considered in this analysis,
include the short and long-term effects of the tax increase over time, and general trends in alcohol consumption.
We also made certain assumptions about the price of alcoholic beverages – based on national data – and you
may wish to localize that information. You will need some information to complete the calculations. The results will
provide a preliminary estimate only. We encourage you to consult with your state's Alcoholic Beverage Control
agency, Department of Revenue, or legislative finance committees.
Equation on Which this Calculator is Based
How to use this Calculator
Example
Select One:
Beer Wine Liquor
References:
Leung, S.-F. & Phelps, C.E. (1993). "My kingdom for a drink…? A review of estimates of the price sensitivity of
demand for alcoholic beverages." In: Hilton, M.E., and Bloss, G., eds. Economics and the Prevention of
Alcohol-Related Problems: Proceedings of a Workshop on Economic and Socioeconomic Issues in the
Prevention of Alcohol-Related Problems, October 10-11, 1991, Bethesda, MD. NIAAA Research Monograph No.
25. Rockville, MD: NIAAA, pp. 1-31.
Nelson, J.P. (1997). "Economic and demographic factors in U.S. alcohol demand: A grown-accounting analysis."
Empirical Economics. 22(1):83-102.
Young, D.J. & Bielinska-Kwapisz, A. (2002). "Alcohol Taxes and Beverage Prices." National Tax Journal.
LV(1):57-74.
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Resources/Tools
Calculating Average Retail Sales Price
The Federation of Tax Administrators' listing of current state alcohol excise tax rates:
Beer Wine Liquor
The Tax Foundation's Listing of Current State Alcohol Tax Rates
States Ranked by Alcohol Excise Tax Rates:
Lowest to Highest
Inflation Calculator (Bureau of Labor Statistics)
Consumer Price Index Information (Bureau of Labor Statistics)
State Alcohol Laws on Taxation (from the
Alcohol Epidemiology Program at the University of Minnesota).
*This resource is old, but still relevant for most states.* To use: Scroll down to the drop menus, select the
category "Taxation", as well as the state in which you are interested.
Center for Disease Control's National Center for Health Marketing (NCHM) Task Force on Community Preventive
Services recommends increasing alcohol excise taxes. Click
here for the results of their review of 72 different
studies on the effects of alcohol pricing on alcohol consumption and related harms.
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Research
Effects of Beverage Alcohol Price and Tax Levels on Drinking: A meta-analysis of 1003 estimates from 112
studies—establishes that beverage alcohol prices and taxes are inversely related to drinking and that the effects
are largely compared to other prevention policies and programs. Article by Alexander C. Wagenaar, Matthew J.
Salois & Kelli A. Komro, February 2009, published in
Addiction,
Volume 104, Issue 2 (p 179-190).
Study:
Paying More for Alcohol Saves Lives. Published December 2008. Evidence shows that fewer
alcohol-related deaths occurred in Alaska following an increase in alcohol tax.
The Cost of Alcohol Abuse in California, prepared by the
Institute for the Study of Social Change, March
2004. This paper calculates in detail the costs associated with alcohol abuse in California. When possible, tax
activists should consider researching comparable numbers for their state.
A National Poll conducted by the
American Medical Association finds that the majority of Americans support
raising state alcohol taxes.
George Washington University's
Ensuring Solutions to Alcohol Problems, April 30, 2003. Press Release:
Few States Earmark Alcohol Excise Tax for Treatment
George Washington University's
Ensuring Solutions to Alcohol Problems Report:
Treating Alcohol Problems and State Alcohol Tax Revenues
"The Effects of Price on Alcohol Consumption and Alcohol-Related Problems" article by Frank
Chaloupka, et al. (2002). Published in Alcohol Research and Health, 26(1):22-34.
"Reducing Morbidity and Mortality through Alcohol Pricing and Taxation" report by Frank Chaloupka,
Director of
ImpacTeen.
AARP survey shows 8 in 10 people in North Carolina support an increase in alcohol excise taxes.
The national opinion survey on
Youth Access to Alcohol, prepared by the University of Minnesota Alcohol
Epidemiology Program showed that 81% of Americans support raising alcohol taxes if they are used "to pay for
programs to prevent minors from drinking and to increase alcohol treatment programs". [Harwood, E. M.,
Wagenaar, A.C. & Bernat, D.H. (2002). Prepared for the Robert Wood Johnson Foundation.]
Report on Alcohol Policies in the U.S. which reviews alcohol taxation in each of the states (from the
Alcohol Epidemiology Program at the University of Minnesota).
The Rutgers Eagleton Institute of Politics, 2001 Opinion of the
Public Health System Survey showed that 76%
of New Jersey residents favor increased taxes on tobacco, alcohol and firearms to provide more money for
improving the state’s public health system.
NIAAA (2000). 10th Special Report to the U.S. Congress on Alcohol and Health. Chapter 6.
Introduction: Economic and Health Services Perspectives
Part I: Effects of Changes in Alcohol Prices and Taxes
Part II: Cost Research on Alcohol Treatment
Part III: The Economic Costs of Alcohol Abuse
Bibliography of articles and books that discuss the impact of alcohol tax policy on alcohol consumption
and harm.
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News from Around the Country (2005)
Legislative efforts to raise alcohol taxes at the state level have been accelerating all over the country. Although
they have generally been unsuccessful, the sheer number of active legislative initiatives suggests that the
alcohol-tax issue has plenty of life and growing support. Some of the prominent state battles are
highlighted below.
Connecticut:
FAILED
House Bill 6684 would have raised all alcohol taxes by 15 percent. On April 21, the Joint Finance, Revenue and
Bonding Committee passed a tax bill (S.B.1321) that incorporated elements of H.B.6684, but did not include the
alcohol tax increases.
Indiana:
FAILED
House Bill 1120 made it through the House and received the endorsement of the Senate Tax and Fiscal Policy
Committee before having the alcohol tax increase provisions eliminated by the full Senate. The bill moved to
Conference Committee, where it passed without alcohol tax increases. Had the bill passed, the excise tax on
beer would have doubled, increasing from 12 to 23 cents/gal; the wine tax would have increased by 25 percent,
from 47 to 59 cents/gal; and the liquor tax would have risen by 29 percent, from $2.68/gal to $3.35/gal.
Kentucky:
PASSED
On March 18, Gov. Ernie Fletcher signed H.B.272 into law. This tax overhaul bill raises all alcohol sales taxes -
beer, liquor and wine - from nine to eleven percent. The tax is levied on wholesalers, and revenue from the tax
is being used to cut personal income taxes.
Louisiana:
FAILED
Gov. Kathleen Blanco had proposed increasing alcohol taxes as one means of funding pay raises for the state’s
poorly paid teachers. The governor proposed raising taxes on tobacco, alcohol and gambling, netting some
$120 million in new revenue for the state.
Minnesota:
FAILED
Two alcohol tax increase bills went down to defeat early in the session. Later, on April 21, Sen. Jane Ranum, who
heads the Senate Public Safety Budget Division, introduced a public safety spending bill that would have
increased the excise tax on beer, wine and liquor by one penny per drink. The tax proposal failed to survive in
the Senate Taxes Committee and was removed from the bill on April 28.
Missouri:
FAILED
House Bill 184 would have created the “Fund for the Reduction of Alcohol-Related Problems and Underage
Drinking.” The bill would increase the beer tax from 6 to 24 cents/gal; liquor from $2 to $4/gal; and wine from 42
to 78 cents/gal. All new revenue from those taxes would be dedicated - half to prevention and the other half to
treatment and law enforcement. Impressively, the bill would have indexed the tax rates to future inflation.
North Dakota:
FAILED
Senate Bill 2372 created a “Responsible Choices Commission,” focusing on alcohol prevention and treatment.
The original proposal included a provision to fund this commission with a beer tax increase, from 16 to 25
cents/gal. The tax increase was later stripped from the bill, which will require the commission to raise its
own funds.
Ohio:
FAILED
House Bill 66 would have doubled the beer tax, from 18 to 36 cents/gal, and the wine tax, from 30 to 60
cents/gal. The House approved it the second week of April, but on May 24th, the Senate Finance Committee
removed the alcohol tax increases from the bill.
Oregon:
FAILED
Senate Bill 1049 would have given counties the right to add a fee of 10 cents to every can of beer sold in their
county. The fee would have been collected by the State of Oregon and placed in a new Malt Beverage Cost
Recovery Fee Fund, and then returned to the counties that originally imposed the fee. Impressively, the fee
would have been indexed to inflation. Revenue from the fee would explicitly fund alcohol prevention,
enforcement and treatment programs.
South Dakota:
FAILED
Senate Bill 127 would have raised the distilled spirits excise tax from $3.93/gal to $15.36/gal; the wine excise tax
from 93 cents/gal to $4.39/gal; and the beer excise tax from 27 cents/gal to $1.28/gal. All proceeds would have
gone to the law enforcement and domestic violence funds.
PENDING
Pennington County is collecting signatures for a 2006 ballot initiative to add a 1 percent tax on the retail sale of
all alcohol. The tax would provide funds for county law enforcement agencies, which do not receive any revenue
from the state's alcohol taxes.
Texas:
FAILED
On May 3, the Senate Finance Committee recommended raising all alcohol taxes by 25 percent. The Legislature
is facing a court order to change the way it funds its public education system, which currently relies on property
taxes. House Bill 3 included an amendment, which was later removed, that would have raised alcohol taxes.
Washington:
PASSED
House Bill 2314, which was signed by the governor on May 17, raises the state liquor tax from $2.44/liter to
$3.77/liter. The state operating budget also renews the 42 cents/liter liquor mark-up that was imposed two
years ago. Both tax increases took effect July 1.
Wisconsin:
PENDING
In the state of beer and brats, Rep. Therese Berceau introduced a bill that would increase the beer tax by 50
percent, from $2 to $3 per 31-gallon barrel. The tax would raise $4.7 million a year specifically to pay for
alcohol-abuse treatment. Although Wisconsin has the second-lowest beer tax rate in the nation (after Wyoming),
Berceau has encountered major resistance to her bill, which would raise the price of a six-pack by two cents.
The bill is currently in the Assembly Committee on State Affairs.
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State Alcohol Tax Increases, 2002-2005
The following states have increased alcohol taxes in their states in 2002-2005.
* These include control states, where mark-ups have increased.
2002
Alaska
| Product |
2001 Tax Rate (per gallon) |
2002 Tax Rate (per gallon) |
| Beer |
$0.53 |
$1.07 |
| Wine |
$0.85 |
$2.50 |
| Liquor |
$5.60 |
$12.80 |
Tennessee
| Product |
2001 Tax Rate (per gallon) |
2002 Tax Rate (per gallon) |
| Beer |
$0.13 |
$0.14 |
| Wine |
$1.10 |
$1.21 |
| Liquor |
$4.00 |
$4.40 |
Puerto Rico
| Product |
2001 Tax Rate (per gallon) |
2002 Tax Rate (per gallon) |
| Beer |
$2.75 |
$4.12 |
| Wine |
$1.20 |
$1.66 |
| Liquor |
$22.75 |
$31.29 |
2003
See All 2003 Alcohol Tax Proposals
Arkansas
| Product |
2002 Tax Rate (per gallon) |
2003 Tax Rate (per gallon)* |
| Beer |
$0.23 |
same |
| Wine |
$0.75 |
same |
| Liquor |
$2.50 |
same |
*Legislation continued an increase that would have ended this year.
Idaho
| A 2% surcharge will be imposed on liquor sold through state-controlled stores beginning July 1, 2003. |
Nebraska
| Product |
2002 Tax Rate (per gallon) |
2003 Tax Rate (per gallon) |
| Beer |
$0.23 |
$0.31 |
| Wine |
$0.75 |
$0.95 |
| Liquor |
$3.00 |
$3.75 |
Nevada
| Product |
2002 Tax Rate (per gallon) |
2003 Tax Rate (per gallon) |
| Beer |
$0.09 |
$0.16 |
| Liquor (>22% ABV) |
$2.05 |
$3.60 |
| Liquor (14-22% ABV) |
$0.75 |
$1.30 |
| Liquor (0.5-14% ABV) |
$0.40 |
$0.70 |
Utah
| Product |
2002 Tax Rate (per gallon) |
2003 Tax Rate (per gallon) |
| Beer |
$0.35 |
$0.41 |
| Liquor |
61% markup |
64% markup |
Washington
| Product |
2002 Rate |
2003 Rate |
| Liquor Mark-up |
$0.37/liter |
$0.79/liter (temporary) |
2004
See All 2004 Alcohol Tax Proposals
There were no significant tax increases in 2004.
2005
See All 2005 Alcohol Tax Proposals
Kentucky
| Raised all alcohol sales taxes - beer, liquor and wine - from 9 to 11 percent. The tax is levied on wholesalers. |
Washington
| Product |
2004 Rate |
2005 Rate |
| Liquor Tax |
$2.44/liter |
$3.77/liter |
| Liquor Mark-up |
$0.79/liter (temporary) |
$0.79/liter (permanent) |
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Alcohol Tax Opportunity Assessment (2003) - states that present good opportunities to raise alcohol taxes.
Anheuser-Busch Companies' June 2003
Public Affairs Update contains a map of the United States that
highlights "high-risk" states where tax bills present a threat to beer industries as of May 26, 2003. The
"high-risk" states include: Washington, Oregon, California, Nevada, Texas, North Carolina, Pennsylvania, New
Jersey, Maine and Vermont. States that pose "significant" risk are: Idaho, Arkansas, Connecticut, Georgia,
Illinois, Massachusetts, Michigan, Ohio, Oklahoma and South Carolina. We might as well consider these
opportunity states.
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Refuting Industry Claims
The beer industry claims that tax increases have destroyed jobs are not supported by the facts.
Beer industry spokesmen claim that increases in beer taxes harm the economy, punish consumers and the
industry, and lead to massive reductions in employment. The Beer Institute's website asserts that "the doubling
of the beer tax in January 1991, from $9 to $18 per barrel" displaced 31,000 workers. Official data from the U.S.
Department of Labor flatly contradict this claim.
Between 1990 and 2000, beer industry wholesale trade employment rose by more than 8,000 jobs, including
increases between 1990 and 1992 (a year before and after the tax increase).
U.S. Department of Labor, Bureau of Labor Statistics
Employment at the manufacturing level declined by 7,600 between 1990 and 2000. However, that decline
clearly represents a steady reduction in jobs that began before 1960. Since then, those jobs have been cut in
half (from some 70,000 in 1960 to 32,100 in 2000). According to the Bureau of Labor Statistics, manufacturing
jobs held steady between 1990 and 1992 at close to 40,000, then fell again between 1992 and 1998. These job
reductions have resulted from increased mechanization and other efficiencies, as well as the dramatic
consolidation within the beer industry during the past decades, not from beer tax increases! The graph below
shows a steady decline in beer-industry manufacturing jobs since 1960.
U.S. Department of Labor, Bureau of Labor Statistics
The graph below illustrates that jobs in the manufacturing sector of the beer industry declined from 39,700 to
32,100 between 1990 and 2000. The number of production workers held steady between 1990 and 1995.
U.S. Department of Labor, Bureau of Labor Statistics
We calculate a net gain in beer-industry jobs following the 1991 federal beer-tax increase. However, even if jobs
had been lost, other factors may have contributed strongly to the losses in the beer sector. For example,
national unemployment went from 5.6% in 1990 to 7.5% in 1992 (hardly the result of the beer-tax increase). A
recessionary economy helped depress sales of beer, and growing concern about health and safety concerns
related to drinking may have moderated consumption. In any case, jobs lost to the beer industry would likely
have been created elsewhere in the economy, as money not spent on beer flowed to other goods and services.
In fact, as beer consumption decreased between 1990 and 1992 (from 27.5 to 25.9 gallons per capita –
USDA/Economic Research Service), per capita consumption of bottled water rose from 8.0 to 8.2 gallons,
carbonated soft drinks rose from 46.2 to 48.2 gallons, fruit juices from 7.9 to 8.4 gallons, fruit drinks from 6.3 to
6.5 gallons and canned and bottled iced tea from 0.1 to 0.2 gallons. Arguably, retail employees at grocery and
convenience stores, who had previously been handling more beer, then began handling more non-alcoholic
beverages instead.
Other Employment Facts
According to the U.S. Department of Labor, grocery store employment declined by approximately 33,000 jobs
between 1990 and 1992 (consistent with overall job loss in the economy), but rebounded in 1993. Those jobs
have increased steadily since then.
Liquor store employment also decreased between 1990 and 1992 (from 118,400 to 114,800), but employment
declines in this sector of the economy began in 1982, long before federal tax increases on liquor in 1986 and on
liquor, wine and beer in 1991 (U.S. Department of Labor, Bureau of Labor Statistics). These data clearly
challenge the liquor industry's exaggerated claims of job losses. The Distilled Spirits Council of the United States'
website asserts that 98,000 jobs, directly or indirectly generated by the liquor industry, were lost after the tax
increases on liquor in 1986 and 1991.
U.S. Department of Labor, Bureau of Labor Statistics
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Source: Center for Science in the Public Interest.
www.cspinet.org
