Stop the Beer Tax Rollback
Reject HR 1305
The beer industry wants to make beer even cheaper by rolling
back the current federal excise tax on beer to its 1951 level. Beer industry
representatives will be in town this week lobbying to add additional co-sponsors
to H.R. 1305, a bill to enrich their bottom line. Don’t buy it.
Beer Tax Reductions Will Increase Alcohol-Related Harms
According to research reported by the National Institute on Alcohol Abuse and Alcoholism, increasing beer prices is an effective means of reducing alcohol problems. Higher alcohol taxes lead to reductions in the levels and frequency of drinking and heavy drinking among youth (1,2); lower traffic crash fatality rates, especially among young drivers (3,4); and reduced incidence of some types of crime (5). Logically, lower beer taxes will likely lead to higher levels and frequency of drinking among youth and add to traffic crash fatalities.
Economists at the National Bureau of Economic Research estimate that the 1991 increase in beer taxes saves more than 600 young lives in alcohol-related crashes each year. (6)
Beer is the favorite alcoholic beverage among young people (7); according to the Substance Abuse and Mental Health Services Administration (SAMHSA), underage persons now consume more than 11.4% of all the alcohol sold in the U.S.
Alcohol (primarily beer) consumption among underage persons is a leading cause of school failure, violence, unwanted pregnancies, accidental deaths, and numerous other injuries and social and economic costs to society (8,9)
Beer Taxes and Prices are LOW by Historical and International Standards
The current federal excise tax on a six-pack of beer amounts to approximately 33 cents. Had beer taxes kept pace with inflation since 1951, the date of the last major increase, the tax rate today would be more than one dollar. Had the tax merely kept up with inflation since the only increase since then in 1991, it would be nearly 45 cents per six-pack today.
On a $3 beer purchased at a restaurant or bar, the federal excise tax amounts to less than two percent. Compared to beer taxes in most other countries, this rate of tax is exceptionally low. (10)
The Economic and Social Costs of Beer Drinking Dwarf Revenues from Beer Taxes
In 2001, beer taxes provided some $3.5 billion in revenues to the federal government (11).
Alcohol problems cost American society more than $184 billion in 1998 (12) in health care, criminal justice, social services, property damage, and loss of productivity expenses. Alcohol is a factor in as many as 105,000 deaths annually (13) in the United States and a primary contributor to a wide array of health problems and human suffering. These include various cancers, liver disease, alcoholism, brain disorders, motor vehicle crashes, violence, crime, spousal and child abuse, drownings, and suicides (8,14).
Underage drinking, much of it beer, costs Americans nearly $53 billion in 1996, amounting to the equivalent of $200 for every man, women and child in the United States (9).
Beer Taxes Do Not Burden Moderate Drinkers
Most Americans either do not drink beer at all or consume it moderately. Among beer drinkers, no more than 20 percent drink as much as 2 beers per day (15). The vast majority of beer drinkers pay, at most, only pennies per week in beer taxes.
The heaviest drinking 10 percent of beer drinkers consume 43 percent of all beer (16). The federal excise tax falls on heavy drinkers who bear a more equitable share of the costs consistent with the disproportionate level of problems their drinking causes.
The Beer Industry Makes Deceptive Claims
The beer industry misleadingly claims that taxes represent 44% of the retail price of beer. This calculation includes sales and excise taxes, federal income and payroll taxes, state and local income, payroll and other taxes collected from producers of all products. Actually, the federal beer excise tax amounts to less than 7% of the average price of a six-pack and about 5% of the price of a six-pack of premium beer.
Beer industry public relations efforts include misleading attempts to downplay the extent and severity of drinking problems and false claims of credit for having contributed to those reductions in problems. Such claims ignore the beneficial effects of key public policy interventions that are most responsible for declines in underage drinking and in drunk driving fatalities: implementation of Age-21 as the “national” minimum legal drinking age (MLDA) and the 1991 increase, the first in 40 years, in the federal beer excise tax.
Beer wholesalers tout beer as the “beverage of moderation,” when in fact, Rogers and Greenfield (1999) found strong evidence that beer in the United States is disproportionately consumed in hazardous amounts relative to wine and distilled spirits. Beer also accounts for more than four-fifths (81%) of all the alcohol that is reported to be drunk in hazardous amounts (15).
Industry expenditures on “prevention” messages and programs are far outweighed by what it spends promoting, glamorizing, and normalizing the use of its products. Anheuser-Busch, the world’s largest beer producer, says that it spent some $300 million on alcohol education and awareness efforts between 1982 and 2000, or about $15 million per year. In the year 2000 alone, the company spent more than $355 million advertising its products, and likely more than double that on promotions, sponsorships, and discounts. For every dollar it spends on alcohol education, the company spends at least $50 promoting beer.
(1) Coate, D., & Grossman, M. (1988). The effects of alcoholic beverage prices and legal drinking ages on youth alcohol use. Journal of Law and Economics 31(1):145-171.
(2) Grossman, M.; Coate, D.; & Arluck, G.M. (1987). Price sensitivity of alcoholic beverages in the United States: Youth alcohol consumption. In: Holder, H., ed. Control Issues in Alcohol Abuse Prevention: Strategies for States and Communities. Greenwich, CT: JAI Press, pp. 169-198.
(3) Ruhm, C.J. (1996). Alcohol policies and highway vehicle fatalities. Journal of Health Economics 15(4):435-454.
(4) Saffer, H., & Grossman, M. (1987). Beer taxes, the legal drinking age, and youth motor vehicle fatalities. Journal of Legal Studies 16(2):351-374.
(5) Cook, P. J., & Moore, M. J. (1993). Economic perspectives on reducing alcohol-related violence. In: Martin, S. E., ed. Alcohol and Interpersonal Violence: Fostering Multidisciplinary Perspectives. National Institute on Alcohol Abuse and Alcoholism Research Monograph No. 24. NIH Pub. No. 93-3496. Rockville, MD: the Institute, pp. 193-212.
(6) Grossman, M., Chaloupka, F. J., Saffer, H., & Laixuthai, A. (1994). Effects of alcohol price policy on youth: A summary of economic research. Journal of Research on Adolescence, 4(2):347-364.
(7) Eigen, L. D. (1991). Alcohol Practices, Policies, and Potentials of American Colleges and Universities. Office for Substance Abuse Prevention White Paper. Rockville, MD: U.S. Department of Health and Human Services.
(8) Office of Disease Prevention and Health Promotion. (2000). Healthy People 2010: Understanding and Improving Health. URL: http://www.health.gov/healthypeople/Document/html/uih/uih_bw/uih_4.htm#subsabuse. (Visited, April 9, 2002).
(9) Levy, D. T., Miller, T. R., & Cox, K. C. (1999). Costs of Underage Drinking. Prepared by the Pacific Institute for Research and Evaluation in support of the Office of Juvenile Justice and Delinquency Prevention, Enforcing the Underage Drinking Laws Program.
(10) Hurst, W., Gregory, E., & Gussman, T. (1997). Alcoholic Beverage Taxation and Control Policies. Ontario, Canada: Brewers Association of Canada.
(11) Bureau of Alcohol, Tobacco and Firearms. (2001). Statistical release: Alcohol, tobacco and firearms tax collections. [WWW document]. URL: http://www.atf.treas.gov/alcohol/stats/4thqtr01.pdf. (Visited, April 9, 2002).
(12) Harwood, H. (2000). Updating Estimates of the Economic Costs of Alcohol Abuse in the United States: Estimates, Update Methods and Data. Report prepared by the Lewin Group for the National Institute on Alcohol Abuse and Alcoholism.
(13) McGinnis, J.M. & Foege, W. H. (1999). Mortality and morbidity attributable to use of addictive substances in the United States. Proceedings of the Association of American Physicians, 11(2):109-118.
(14) National Institute on Alcohol Abuse and Alcoholism. (2000). Drinking over the life span: Issues of biology, behavior and risk. In: 10th Special Report to the U.S. Congress on Alcohol and Health. Bethesda, MD: U.S. Department of Health and Human Services, pp. 1-66.
(15) Rogers, J. D., & Greenfield. T. K. (1999). Beer drinking accounts for most of the hazardous alcohol consumption reported in the United States. Journal of Studies on Alcohol, 60(6).
(16) Klein, H., & Pittman, D.J. (1994). The distribution of alcohol consumption in American society. In: Venturelli, P.J. (Ed.) Drug Use in America: Social, Cultural, and Political Perspectives. Boston: Jones and Barlett Publishers, pp. 3-11.
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