No Drink Tax

Myth: Alcohol consumption costs state and local governments billions of dollars each year.

Fact: Anti-alcohol groups, such as the Marin Institute, like to fund studies arguing that moderate to heavy alcohol consumption costs governments billions of dollars in order to support their arguments for increased alcohol taxes. These ominous costs, however, have been shown to be gross overestimates. Those in favor of increased alcohol taxes choose to factor individual costs of drinking as costs borne to all of society without considering the health benefits or the increased wage earnings associated with moderate alcohol consumption.

Myth: Higher alcohol taxes decrease underage drinking.

Fact: Studies show that increasing alcohol taxes has little effect on the overall practice of underage drinking. One study published in Contemporary Economic Policy showed that youth price sensitivity to alcohol tax increases fell after states adopted the standard drinking age of 21. Other studies show that beer taxes have a relatively small and statistically insignificant effect on teen drinking. Rates of underage drinking have remained relatively stable since the early 1990s despite alcohol tax increases.

Myth: Drinking causes an individual to earn lower wages than non-drinkers.

Fact: Researchers have actually proven the opposite is true: drinkers earn more than their non-drinking counterparts. Studies show drinking actually increases the benefits derived from education and experience, leading to higher wages. In fact, one study found that “males who frequent bars at least once per month earn an additional 7 percent on top of the 10 percent drinkers’ premium.”

Myth: Increasing alcohol taxes will curb alcohol abuse.

Fact: Numerous studies have found that raising alcohol taxes does very little to curb the consumption of the heaviest drinkers. Because their demand for alcohol is the most inelastic, heavy drinkers are the most likely to pay the higher prices associated with increased alcohol taxes. The heaviest-drinking 6.5 percent of adults consume half of all alcohol and therefore pay the majority of alcohol taxes. Increased alcohol taxes instead curb consumption by moderate drinkers.

Myth: Heavier beer taxes reduce alcohol-related traffic fatalities.

Fact: Research shows that beer taxes do little to curb the drinking of the heaviest alcohol consumers. And according to the National Transportation Safety Board, Hardcore drunk drivers account for 70 percent of alcohol-related fatalities. Studies show that the data linking beer taxes and alcohol traffic fatalities is not significant enough to prove increased alcohol taxes decrease alcohol-related traffic fatalities.

Myth: Alcohol taxes affect all consumers equally.

Fact: Alcohol taxes are regressive and the poor pay a disproportionate share. Under current law individuals making less than $20,000 per year face federal alcohol tax burdens that are more than 18 times higher than individuals making in excess of $200,000.