The effects of prices on alcohol use and its consequences

Abstract

Over the past three decades, economists and others have devoted considerable effort to assessing the impact of alcoholic-beverage taxes and prices on alcohol consumption and its related adverse consequences. Federal and State excise taxes have increased only rarely and, when adjusted for inflation, have declined significantly over the years, as have overall prices for alcoholic beverages. Yet studies examining the effects of increases of monetary prices (e.g., through raising taxes) on alcohol consumption and a wide range of related behavioral and health problems have demonstrated that price increases for alcoholic beverages lead to reduced alcohol consumption, both in the general population and in certain high-risk populations, such as heavier drinkers or adolescents and young adults. These effects seem to be more pronounced in the long run than in the short run. Likewise, price increases can help reduce the risk for adverse consequences of alcohol consumption and abuse, including drinking and driving, alcohol-involved crimes, liver cirrhosis and other alcohol-related mortality, risky sexual behavior and its consequences, and poor school performance among youth. All of these findings indicate that increases in alcoholic-beverage taxes could be a highly effective option for reducing alcohol abuse and its consequences.

Figure 1

Average real Federal excise taxes (in dollars per barrel) on alcoholic beverages 1951–2009. SOURCE: U.S. Department of Treasury, Alcohol and Tobacco Tax and Trade Bureau. Historical tax rates [article online]. Available at: http//www.ttb.gov/tax_audit/94a01_4.shtml. Accessed July 28, 2011 NOTE: Current Federal excise taxes were set on January 1, 1991. Inflation-adjusted values are based on the All Urban Consumers consumer price index series.

Figure 2

Average real State taxes on beer tax 1951–2009. SOURCE: Brewers Almanac 2009: Beer Institute. NOTE: The estimates are based on the mathematic average of beer taxes of 50 States and the District of Columbia. Inflation-adjusted values are based on the All Urban Consumers consumer price index series.