UF study: alcohol tax eases drinking
Published: Saturday, January 17, 2009 at 6:01 a.m.
Last Modified: Friday, January 16, 2009 at 11:02 p.m.
Researchers at the nation's leading party school believe they have discovered a proven method to discourage people from drinking: make them pay more.
In a newly released study by the University of Florida, health researchers say that raising taxes on alcohol helps curb alcohol consumption either by discouraging people from drinking in the first place or by forcing them to limit how much they drink when they do imbibe.
The results, said Alexander Wagenaar, a professor of epidemiology in UF's College of Medicine and the report's senior author, "show without doubt that alcohol taxes and prices affect drinking."
"When prices go down, people drink more, and when prices go up, people drink less," he said.
Declaring that higher prices deter people from purchasing a product, or greater amounts of that product, might not be ground-breaking economics philosophy. "On this law," the economist David Henderson, a former adviser to President Reagan, once noted, "is built almost the whole edifice of economics."
But the significance, Wagenaar maintains, is that the correlation between the tax-related increased cost of beer, wine and spirits and reduced consumption is so consistent and strong that using taxes as a deterrent to drinking could be more effective than law enforcement, public education, or school outreach efforts.
And the pricing effect on the buying behavior of drinkers worked across the board, with heavy or light drinkers, with adults or underage consumers, Wagenaar said.
The study aggregated the analysis of 112 previous studies, that economists, public health officials and social scientists conducted over four decades, in compiling 1,003 distinct statistical estimates.
It was funded by the Robert Wood Johnson Foundation and published online Thursday in the scientific journal Addiction.
Writing on the findings in the same issue of Addiction, Frank Chaloupka, an economics professor at the University of Illinois at Chicago, declared the study a "true tour de force" of research that will prove to be an "invaluable resource" for other scientists, public health authorities, policy-makers and alcohol-control activists.
"These findings provide a strong rationale for using increases in alcoholic beverage taxes to promote public health by reducing drinking," Chaloupka wrote.
Chastising state and federal elected officials for "rare" and "infrequent" tax increases on alcohol products, Chaloupka asserts their failure to act has actually allowed for a "sharp" decline in the price of alcohol over time, after allowing for inflation.
That, in turn, has forced society to pay a steep price for a spike in a variety of social ills, including fatal car crashes by teen-aged drivers, spousal and child abuse and other violent crime, teenage pregnancies, suicides and workplace accidents.
"These falling prices have led to more drinking than would have been the case had taxes and prices kept pace with inflation and, as a result, greater consequences from alcohol abuse," Chaloupka wrote.
While UF officials say the study does not call for a specific increase in alcohol taxes, Chaloupka notes that Wagenaar's research shows that a 10 percent increase in alcohol prices would lead to a 4.4 percent decline in consumption.
"Perhaps the current economic downturn and resulting revenue needs of governments, coupled with the strong evidence-base on the benefits of higher taxes and prices reviewed thoroughly by Wagenaar et al, and others, will stimulate national and subnational governments to raise their alcoholic beverage taxes," Chaloupka adds.
Away from academia, skeptics have doubts about the efficacy of the proposal.
"Higher taxes would have little effect on addicts and the unsafe, excessive consumption of beer. Those who are inclined to drink excessively will simply switch to cheaper brands, or trade-down," said Eric Criss, executive director of the Beer Industry of Florida, a trade association of the state's largest distributors and a lobbying group in Tallahassee.
"Higher taxes would have the biggest impact on consumption for moderate drinkers who enjoy a cold beer while watching a ball game or having dinner at a restaurant.
Excise taxes on beer are regressive and hidden taxes. They hit cops', teachers' and retirees' paychecks much harder than they would hit a wealthy attorney or doctor. That's unfair."
Criss, citing other research, said such a tax increase, to be an effective deterrent, would have to be so high that it would ruin Florida's alcoholic beverage industry, which now generates roughly $800 million in tax revenues and provides 103,000 jobs.
"Thus, increasing taxes on beer for the purpose of improving public health is bad policy. It will only cost jobs and negatively impact tax collections by the state," Criss said.
A student leader at UF - which in July, much to the chagrin of university administrators, was declared by Princeton Review to be America's top party school after a survey of 120,000 students at 368 colleges and universities across the country - also questioned whether more or higher taxes would work.
"I would have to say that students would definitely be opposed to a raise in prices, but I doubt it will drastically hold them back from going out and having a good time," said Clay Mathews, president of UF's Interfraternity Council, a social group that represents more than 2,300 students.
"It may even lead them to go out to different venues with better deals, drawing away business from your larger, more popular restaurants and bars."
One comparison to the alcohol-tax debate is with cigarettes.
Chaloupka and others, such as the American Lung Association, maintain that two decades' worth of big tax hikes on tobacco products have precluded people, especially youth, from starting to smoke or inspired them to quit.
The Legislature will debate a $1-a-pack increase in cigarette taxes, to about $1.34 per pack, in the spring.
It's estimated to raise at least $700 million in additional revenues, if adopted.
State Rep. Larry Cretul said he expects an alcohol tax to emerge as well, in an overall push to increase sin taxes to raise money.
While he wasn't sure how much traction an alcohol tax would get with lawmakers, the Ocala Republican, who also represents UF, said Rep. Dean Cannon, chairman of the House Tax and Finance Committee, tends to let each proposal stand on its own merit.
Moreover, that committee, of which Cretul is a member, includes a number of lawmakers who both support and oppose the idea of a sin tax as a money-maker, he observed.
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