The Kenkel Tax Revisited

In 1993, economist Donald S. Kenkel thought of a rather ingenious idea: lower the drinking age to 18, and also raise the alcohol tax by 12% to 86% (midpoint 49%) of the current price at the time.  To quote him in the abstract of his paper, emphasis ours:

The legal drinking age targets a group at a high risk of alcohol-related problems. This paper argues that taxation could achieve the same benefits as the legal drinking age at a substantially lower social cost. Existing empirical research suggests that simultaneously lowering the legal age to 18 and taxing alcohol purchases at between 12 to 86 percent of the current price would achieve the same results as the current legal age. Levying a special teen tax only on young adults would minimize its social costs. Teen tax revenues between $564 million to $4.03 billion measure the net social gain of replacing the current prohibition on young adults' alcohol purchases with a taxation policy.

Note that sentence in bold right there.  This is, of course a rather unorthodox idea, and we have noted in the past that raising alcohol taxes should be done across the board, not just for one age group.  That is, the "teen tax" idea, which we prefer to call a "Kenkel tax", while lowering the drinking age to 18, is still head and shoulders better than the 21 drinking age.  We could perhaps even give some to the extra revenue to groups like MADD to buy them off as well and get them on board with it.

If we go that route, it would be best to repackage the idea a bit as a discount for people over 21, rather than a tax on 18-20 year old young adults.  That is, the list price by default would be the price that 18-20 year olds would pay, and the "over-21 discount" would be taken off at the register, much like sales tax but in reverse.  Doing so would put it on the very same spectrum as things like senior citizen discounts, which are well tolerated in our society.

It would also be essentially self-enforcing, since retailers would obviously want to get the extra money!

Of course, a LOT has changed since 1993, not least being the gradual erosion of alcohol taxes by inflation, especially in more recent years.  The last time the federal alcohol taxes were raised was in 1991, and if they were adjusted for inflation, they would be more than double what they are now.  So perhaps one could raise the alcohol taxes across the board to what they were in real dollars in 1991, and then on top of that, add an additional 12% - 86% to the new tax-inclusive price, which then can be taken off at the register as a discount for people over 21.  Or any combination.

This idea can also dovetail nicely with minimum unit pricing (MUP), which is a complementary policy to taxes.  Though it would probably be best practice to set a two-tier MUP, with stronger beverages (more than 20% ABV) having a higher MUP than weaker beverages, to avoid obvious perverse incentives of price hikes on beer, wine, and cider inadvertently steering heavy drinkers more towards distilled spirits, as seen in Scotland.  Thomas Jefferson literally predicted that over two centuries ago.

Twenty-One Debunked is by no means wedded to this idea, but we will still support nonetheless it if it means that we can FINALLY lower the drinking age to 18 sooner than later.

Bonus points for doing this idea with the gas tax as well.  That is, raising it across the board, while giving a partial rebate or "prebate" to licensed vehicle registrants over 21, and an even greater rebate or "prebate" to those over 25.  But hopefully not until gas prices come back down from current wartime highs!