Wednesday, December 5, 2012

Would a Price Floor Be a Good Idea Here?

Recently, UK Prime Minister David Cameron has begun to support the idea of setting a minimum price per unit of alcohol, which currently does not exist in Britain.  The rationale is that it would cut down on excessive drinking and related problems.  Clearly, Britain’s binge-drinking culture (affecting all ages, not just youth) is nothing short of outrageous, even by American standards, though it has improved somewhat in the past decade.   The alcohol taxes in the UK have actually risen faster than inflation in recent years, but supermarkets continue to get around that by selling cheap alcohol at a loss (aka "loss leading") to attract more customers, in a race to the bottom that the overtaxed and declining pubs can never possibly win.  So a price floor seems like a great idea, at least in the UK.

Would that also be a good idea on this side of the pond as well?  Certainly the proposed price floor of 0.40-0.50 pounds per British unit of alcohol (which would be $1.12-$1.42 per American standard drink) would be a bit steep, at least for off-premise alcohol.  A case of 24 beers would be at least $27, similar to the price in Ontario, Canada, and about double the current price for the cheapest beer in much of the USA.  Not only would that idea be unlikely to fly in this country, it may not even be necessary to make set the floor that high to reap significant public health benefits.  Alcohol prices are currently significantly lower in the USA than in the UK (mostly due to our very low alcohol taxes), and the cost of living is lower in the USA as well.  American teenagers and young adults are also significantly poorer than their British counterparts, at least those in the bottom 90%. 

Twenty-One Debunked currently supports (and has always supported) raising and equalizing the alcohol taxes to $21 per proof-gallon for all alcoholic beverages, the same level as the distilled spirits tax was in 1991 adjusted for inflation.  That would push up the price of beer by about $1.20 per six-pack and $4.80 per case, wine by $1.00 per 750-mL bottle, and liquor by $1.00 per 750-mL bottle.  Microbrewers would be exempt from any such tax hike, since their products are already pretty expensive and as small businesses they would be the least able to absorb a tax hike.   A price floor would probably be a good complement to such a policy, and $1.00 (at most) per standard drink would make sense for non-bulk alcohol.  For bulk alcohol (more than an 18-pack of beer or more than 1 gallon of wine or more than 750 mL of spirits), a floor of $0.50-$0.75 would be better, especially since we support keeping the purchase age at 20 or 21 for bulk alcohol while lowering it to 18 otherwise.  This combination of policies is really not all that different in principle from the main idea discussed in Kenkel (1993), yet far more practical and equitable overall.  And bars and restaurants would likely benefit, since pre-gaming with cheap off-premise booze would be reduced.

1 comment:

  1. I support the United Kingdom's Prime Minister's proposal to create a minimum price per unit of alcohol on alcoholic beverages. It's bad that binge drinking is too common in the United Kingdom but the proposal will reduce this rate. Pubs in the U.K. sell alcoholic beverages at a better price, how it should be, than which grocery stores and supermarkets sell alcoholic beverages. Although a moderate or higher tax on the price per unit of alcohol probably can't be passed in the United States, I think it can be passed in the U.K. I also support a $20 or slightly higher tax for every proof-gallon for alcoholic beverages. It's a good proposal. I don't support using the age of 21 as a minimum age for anything so I do support using the age of 20 for the minimum age to purchase alcoholic beverages in bulk.