The Problem: Alcohol consumption is a risk factor for various public health harms. Impaired driving is one of the largest contributors to motor vehicle crashes. Each year in the United States more than 10,000 people die in motor vehicle crashes involving an alcohol-impaired driver. In 2016, these crashes accounted for almost a third of all U.S. traffic-related deaths. CDC: Impaired Driving FactsheetAlcohol consumption is also a risk factor for cancer and other chronic conditions such as cirrhosis.
The Law: Tax law is a mechanism for reducing consumption of unhealthy products. Both the federal government and the states have used taxes as a means of increasing the cost of products associated with health risks. Taxes can be levied upon the production and or sale of alcohol. The former are often described as excise taxes. According to the Federation of Tax Administrators, almost every state taxes the sale or production of beer (5%), liquor (40%) and wine (12%). For examples of state laws taxing alcohol, see Ca Revenue & Taxation Code §§ 32201-32203 (California) and Pa Code §§ 74.1-74.21(Pennsylvania).
The Evidence: Wagenaar et al. systematically reviewed studies that assessed the relationship between alcohol prices, alcohol taxes, consumption, and sales. Wagenaar et al. Effects of beverage alcohol price and tax levels on drinking: a meta-analysis of 1003 estimates from 112 studies. Addiction 2009; 104(2): 179-190. The reviewers identified 112 studies that met their inclusion criteria. These studies contained 1003 estimates of the relationship – or elasticity – between price or tax amount and consumption of a specific type of alcohol. Wagenaar et al. calculated mean elasticities for specific kinds of alcohol and conducted a random effects meta-analysis on an entire collection of estimates. The mean elasticities for beer, wine and spirits were all negative and statistically significant, meaning that increases in price are associated with substantial decreases in consumption. The meta-analysis of all 1003 estimates revealed large inverse relationships between consumption and increases in taxes or prices for all types of alcohol.
The Bottom Line: According to the authors of a peer-reviewed meta-analysis, taxes that increase the price of alcohol effectively reduce overall alcohol consumption.