While the opioid epidemic has recently been declared a public health emergency, what if we were to tell you that there is another drug epidemic that kills even more people (a whopping 88,000 per year vs. 65,000 per year for opioid and all other drug overdoses combined until very recently before fentanyl), a number that has actually been increasing in recent years? And that number, though staggering in itself, is merely the tip of a very large iceberg of injury, illness, crime, violence, motor vehicle crashes, family breakdown, addiction, and other social costs linked to this deadly yet ubiquitous substance. Meanwhile, the powers that be are responding to this epidemic with a collective shrug for the most part. I think the reader would figure out by now that we are talking about alcohol.
And aside from its overall banality, what is particularly notable about the alcohol epidemic is how ageist our response has been. While the epidemic clearly affects all ages, the powers that be have been focusing in laser-like fashion on people under 21 while largely ignoring people over 21, despite the fact that people over 21 make up the vast majority of this epidemic. Not only does this scapegoat young people for largely adult problems, but it also hinders any real solutions to such problems as well. It's basically the "pink elephant in the room".
Fortunately, we know now after decades of reams of research evidence that there is in fact a very simple solution for reducing the death rates and other harms of excessive drinking, both on and off the highways. And that solution is raising alcohol taxes. The higher the price of alcoholic beverages, the fewer deaths and other alcohol-related problems occur, all else being equal. Even modest increases seem to have a significant impact. We know this, yet not only have the powers that be generally let the alcohol taxes lag behind inflation, but have actually decided to lower such taxes just a few years ago.
Even the famous Miron and Tetelbaum study (2009), the one that most thoroughly debunked the idea that the 21 drinking age saves lives--scratch that, it completely deboned, sliced, diced, and julienned the pro-21 argument, then scorched it and laid waste to its remains for good--has (perhaps inadvertently) shown that higher beer taxes do in fact save lives on the highways. It did the latter by simply taking the Dee (1999) study that cast doubt on the benefits of beer taxes, and adding more years of data as well as Alaska, Hawaii, and DC. Turns out that when Dee added state-specific trends to the once-significant fixed-effects model, it absorbed essentially all useful variation in beer taxes from the dataset of the contiguous 48 states and drowned it out--but adding the other two states and DC and more data points brought back the significance (and correct sign!) of the beer tax once again. Now that really says something.
Granted, there are some studies that disagree with the aforementioned studies. But among higher-quality studies with proper methodology (and that are not funded by the alcohol industry), the overwhelming weight of the evidence over many decades supports the inverse relationship between alcohol tax/price and numerous alcohol-related problems even after controlling for confounders. That is true even for more recent studies as well.
Even the famous Miron and Tetelbaum study (2009), the one that most thoroughly debunked the idea that the 21 drinking age saves lives--scratch that, it completely deboned, sliced, diced, and julienned the pro-21 argument, then scorched it and laid waste to its remains for good--has (perhaps inadvertently) shown that higher beer taxes do in fact save lives on the highways. It did the latter by simply taking the Dee (1999) study that cast doubt on the benefits of beer taxes, and adding more years of data as well as Alaska, Hawaii, and DC. Turns out that when Dee added state-specific trends to the once-significant fixed-effects model, it absorbed essentially all useful variation in beer taxes from the dataset of the contiguous 48 states and drowned it out--but adding the other two states and DC and more data points brought back the significance (and correct sign!) of the beer tax once again. Now that really says something.
Granted, there are some studies that disagree with the aforementioned studies. But among higher-quality studies with proper methodology (and that are not funded by the alcohol industry), the overwhelming weight of the evidence over many decades supports the inverse relationship between alcohol tax/price and numerous alcohol-related problems even after controlling for confounders. That is true even for more recent studies as well.
So what should the ideal alcohol tax be? According to researchers, the externality costs of alcohol are estimated to be around $45-58 per proof-gallon, yet the federal tax on distilled spirits is $13.50 per proof-gallon, and for wine and beer it varies but tends to hover between $4 and $5 per proof-gallon. And while state and local alcohol taxes vary, they are also generally very modest in most states, especially for beer. So there is a very wide range by which such taxes can be raised while still being socially efficient.
Of course, those figures are now effectively even lower now that the Republican tax bill has lowered such rates even further for roughly the first 100,000 proof-gallons of all alcoholic beverage categories across the board. But the aforementioned rates still remain the top rates above the respective thresholds in the now-tiered system. Beer was always tiered with a reduced rate for the first 60,000 barrels, but now that reduced rate is even lower still, and for the first time ever distilled spirits now enjoy a reduced rate for the first 100,000 proof-gallons. The rate structure is not inherently bad in itself, of course, but both the new and old rates are simply too low.
Of course, those figures are now effectively even lower now that the Republican tax bill has lowered such rates even further for roughly the first 100,000 proof-gallons of all alcoholic beverage categories across the board. But the aforementioned rates still remain the top rates above the respective thresholds in the now-tiered system. Beer was always tiered with a reduced rate for the first 60,000 barrels, but now that reduced rate is even lower still, and for the first time ever distilled spirits now enjoy a reduced rate for the first 100,000 proof-gallons. The rate structure is not inherently bad in itself, of course, but both the new and old rates are simply too low.
Twenty-One Debunked believes that, along with lowering the drinking age to 18, that alcohol taxes should be raised significantly. Specifically, we support raising and equalizing the federal tax on all alcoholic beverages to the inflation-adjusted 1991 level for distilled spirits, which would be $24 per proof-gallon in 2016 dollars. It should also be simplified by getting rid of all credits and lower tax rates, with perhaps the exception of ones for the first X number of proof-gallons produced by very small domestic producers. At the state level, it would also be good to equalize alcohol taxes across all beverage types, while allowing localities to levy their own alcohol taxes (including sales and gross excise taxes) as they see fit. The latter is especially important for college towns.
(Note that making all alcohol taxes proportional to alcohol content, but setting a higher tax rate per proof-gallon on stronger drinks, would actually be more efficient in that it targets heavy drinkers more in practice. But since the taxes and prices of all alcoholic beverages categories in the USA are too low, first equalize them.)
Even a smaller hike, such as to $16 per proof-gallon across the board, would likely save thousands of lives per year according to researchers. And of course it would also raise more revenue. As for job losses, the best research suggests that the net effect is actually neutral or even positive with respect to jobs overall. So it should be a no-brainer. A win-win-win situation for everyone but the alcohol industry, basically.
Oh, and by the way: craft breweries (both macro and micro) not only exist in high-tax Canada, but actually appear to be thriving over there. Ditto for even higher-tax Iceland as well. Keep in mind that the tax hikes we propose would still leave American beverages cheaper than Canadian beverages. So even if we raise such taxes dramatically without reduced rates or credits for small producers, they will likely continue to thrive here as well (at least if such tax hikes are phased in somewhat gradually).
Even a smaller hike, such as to $16 per proof-gallon across the board, would likely save thousands of lives per year according to researchers. And of course it would also raise more revenue. As for job losses, the best research suggests that the net effect is actually neutral or even positive with respect to jobs overall. So it should be a no-brainer. A win-win-win situation for everyone but the alcohol industry, basically.
Oh, and by the way: craft breweries (both macro and micro) not only exist in high-tax Canada, but actually appear to be thriving over there. Ditto for even higher-tax Iceland as well. Keep in mind that the tax hikes we propose would still leave American beverages cheaper than Canadian beverages. So even if we raise such taxes dramatically without reduced rates or credits for small producers, they will likely continue to thrive here as well (at least if such tax hikes are phased in somewhat gradually).
Don't get us wrong, Twenty-One Debunked does not believe that alcohol is inherently evil or anything like that. We are certainly not in league with the neo-dry lobby! But when we as a society fail to appreciate that alcohol has a very real dark side for all ages, there are very serious consequences to doing so. History speaks for itself.
So what are we waiting for?
MINIMUM ALCOHOL UNIT PRICING
There is also another policy measure designed to reduce the problems and externalities associated with excessive consumption of alcohol: minimum unit pricing. That is, a setting a minimum price per standard unit* of alcohol, which like excise taxes would increase the price of the cheap stuff (that is favored by heavy drinkers) but unlike taxes would have no effect on beverages whose price is already higher than the new minimum. After all, the effect of taxes operates through the mechanism of higher prices, so the public health benefits should be similar for both taxes and a price floor, or some combination of the two. The biggest differences would be in efficiency (who bears the costs) versus revenue (who gets it)--though even for taxes alone, the largest effect size, at the margins, would be on the heaviest drinkers as well, for obvious reasons.
One can see the effects of a price floor on both cheap alcohol in general as well as in bulk quantities. Take a 40 oz. bottle of 8% ABV malt liquor that now costs $2.99. That contains a whopping 5.3 standard American drinks*. If the price floor was then set at $0.75 per standard drink, for example, the price would go up to $3.99, a small but significant jump that really would add up for a heavy (and/or very young) drinker. A six-pack of 12 oz. cans of say, Budweiser (5% ABV) that sells for $5.99 per six-pack, already above that hypothetical price floor at $1.00 per standard drink--and that is a low-ball price for a six-pack in the USA--would be unaffected. A 12-pack of the same product selling for $9.99 would still be unaffected, and an 18-pack could be sold for as little as $13.50. But that 30-pack now on sale for $14.99? Well, the price for that would go up to $22.50. And that 15.5 gallon keg that currently sells for $100 or less, excluding deposit? Well, that contains about 168 standard drinks, so the minimum price for that would jump to $126 per keg. And those prices for bulk quantities would really add up for anyone who frequently throws or attends keggers or other large drinking parties--leading to somewhat fewer such occasions and/or less beer to go around at such parties. And now combine that with even a modest tax hike and you get a marginal effect size that is greater than either measure alone.
What about the hard stuff? Well, we see that while most of it would remain unafffected by a price floor, the cheaper end of the scale would be nonetheless be affected as well in a similar manner to beer. Take a "handle" (i.e. a 1.75 L bottle) of the cheapest vodka, whiskey, or whatever that currently costs $12.99 in some places. That contains about 40 shots of 1.5 oz each, so at 80 proof that would equal roughly 40 standard drinks per bottle. If the minimum price were set at $0.75 per standard drink, that bottle would now cost about $30. Even a mere $0.50 per drink floor price would raise the price of the cheap booze to around $20 or so. So while distilled spirits would be the least affected category overall, they would in fact be even more affected than beer at the lower end. And this would also lessen the yawning disparity between on- and off-premise prices, thus reducing the urge to "pre-load" or "front-load" with cheap booze before going out to the bar, pub, or club.
One big advantage to a price floor is that it would put an end to supermarkets using cheap alcohol as a "loss leader", particularly in countries like the UK that allow vertical integration of the alcohol industry rather than America's "three-tier" system which inherently prohibits vertical integration. And Scotland recently began their own minimum floor price of 50p per standard British alcohol unit (roughly $1 per standard American drink) after finally winning six years of legal challenges from the alcohol industry.
And as of December 2019, the earliest results of Scotland's natural experiment with minimum alcohol unit pricing are now in: alcohol-related death rates are down in Scotland, as well as hospital admissions for liver disease. While the numbers were already dropping well before the pricing law went into effect, the fact that such death and disease rates are still dropping is quite encouraging nonetheless. And consumption data dovetails with this as well.
So what are we waiting for?
MINIMUM ALCOHOL UNIT PRICING
There is also another policy measure designed to reduce the problems and externalities associated with excessive consumption of alcohol: minimum unit pricing. That is, a setting a minimum price per standard unit* of alcohol, which like excise taxes would increase the price of the cheap stuff (that is favored by heavy drinkers) but unlike taxes would have no effect on beverages whose price is already higher than the new minimum. After all, the effect of taxes operates through the mechanism of higher prices, so the public health benefits should be similar for both taxes and a price floor, or some combination of the two. The biggest differences would be in efficiency (who bears the costs) versus revenue (who gets it)--though even for taxes alone, the largest effect size, at the margins, would be on the heaviest drinkers as well, for obvious reasons.
One can see the effects of a price floor on both cheap alcohol in general as well as in bulk quantities. Take a 40 oz. bottle of 8% ABV malt liquor that now costs $2.99. That contains a whopping 5.3 standard American drinks*. If the price floor was then set at $0.75 per standard drink, for example, the price would go up to $3.99, a small but significant jump that really would add up for a heavy (and/or very young) drinker. A six-pack of 12 oz. cans of say, Budweiser (5% ABV) that sells for $5.99 per six-pack, already above that hypothetical price floor at $1.00 per standard drink--and that is a low-ball price for a six-pack in the USA--would be unaffected. A 12-pack of the same product selling for $9.99 would still be unaffected, and an 18-pack could be sold for as little as $13.50. But that 30-pack now on sale for $14.99? Well, the price for that would go up to $22.50. And that 15.5 gallon keg that currently sells for $100 or less, excluding deposit? Well, that contains about 168 standard drinks, so the minimum price for that would jump to $126 per keg. And those prices for bulk quantities would really add up for anyone who frequently throws or attends keggers or other large drinking parties--leading to somewhat fewer such occasions and/or less beer to go around at such parties. And now combine that with even a modest tax hike and you get a marginal effect size that is greater than either measure alone.
What about the hard stuff? Well, we see that while most of it would remain unafffected by a price floor, the cheaper end of the scale would be nonetheless be affected as well in a similar manner to beer. Take a "handle" (i.e. a 1.75 L bottle) of the cheapest vodka, whiskey, or whatever that currently costs $12.99 in some places. That contains about 40 shots of 1.5 oz each, so at 80 proof that would equal roughly 40 standard drinks per bottle. If the minimum price were set at $0.75 per standard drink, that bottle would now cost about $30. Even a mere $0.50 per drink floor price would raise the price of the cheap booze to around $20 or so. So while distilled spirits would be the least affected category overall, they would in fact be even more affected than beer at the lower end. And this would also lessen the yawning disparity between on- and off-premise prices, thus reducing the urge to "pre-load" or "front-load" with cheap booze before going out to the bar, pub, or club.
One big advantage to a price floor is that it would put an end to supermarkets using cheap alcohol as a "loss leader", particularly in countries like the UK that allow vertical integration of the alcohol industry rather than America's "three-tier" system which inherently prohibits vertical integration. And Scotland recently began their own minimum floor price of 50p per standard British alcohol unit (roughly $1 per standard American drink) after finally winning six years of legal challenges from the alcohol industry.
And as of December 2019, the earliest results of Scotland's natural experiment with minimum alcohol unit pricing are now in: alcohol-related death rates are down in Scotland, as well as hospital admissions for liver disease. While the numbers were already dropping well before the pricing law went into effect, the fact that such death and disease rates are still dropping is quite encouraging nonetheless. And consumption data dovetails with this as well.
Later studies seem to agree as well.
So yes, Twenty-One Debunked would be fine with a price floor of $0.75 per standard drink, just as we would be fine with raising alcohol taxes across the board to as high as $31/proof-gallon for all beverage types. A combination of both would also be good as well. Given how moderate and responsible drinkers would barely be affected at all by either measure as noted (as long as the thresholds are not set much higher than the ones above), they hardly qualify as blunt instruments and are in fact highly efficient in practice. That's a small price to pay for liberty.
* One "standard American drink" or "standard unit" of alcohol is equal to one measure of the following: one 12 ounce can/mug/glass of beer at 5% ABV, one 5 ounce glass of wine at 12% ABV, or one 1.5 ounce shot of distilled spirits at 80 proof (40% ABV). This is known as alcohol equivalence. Contrary to popular opinion, these all contain the same amount of alcohol. So keep this in mind if or when you drink.
OTHER DRUGS AND VICES
What about other substances and vices? We know that cigarette taxes are a highly efficient way to reduce smoking rates across the population, with the largest effects in young people. Higher taxes mean higher prices, which mean that more smokers quit and fewer people take up the habit in the first place, all else being equal. Not only do higher cigarette taxes/prices lead to less smoking, but due to cross-elasticity it can also lead to lower consumption of alcohol (and possibly other substances) as well.
But how about nicotine vaping products? There is no reason to believe that these products would be very different in terms of how consumers respond to price, but from a Pigouvian and public health perspective, we must be cautious to NOT tax them any higher than, or even close to, the level of combustible tobacco products, since the latter are far more dangerous than vape products. (The Law of Unintended Consequences is very real, in fact.)
As for cannabis, many states have learned the hard way that overtaxing and overregulating it from the start encourages the black market to persist for years after legalization. Thus, it is best to "start low, go slow" in terms of taxes on newly-legalized cannabis, say no more than $10/ounce for bud and $2.50/ounce for leaf/trim, and only after two or three years then jack up the taxes to $50/ounce or so for bud and $10-15/ounce or so for trim, and perhaps an additional surtax on high-potency (>10% THC) products. For edibles, vapes, and concentrates, the tax should be based on THC content. But ultimately, taxing it more heavily than alcohol and tobacco (which are more dangerous than cannabis and have higher social costs) is likely counterproductive on balance.
Soda and other beverages with added sugar are another products that is subject to vice taxes in recent years. And the evidence so far has been rather promising, showing a decrease in consumption in places where such taxes have been implemented.
And last but not least, let's not forget about the "attention economy" as well. Taxing the advertising revenue from the digital advertising that funds Big Tech will go a long way towards taming its dark side. As for raising the age limit for social media, if they do (and that is debatable) it should not be any higher than 16, as that would do more harm than good.
So yes, Twenty-One Debunked would be fine with a price floor of $0.75 per standard drink, just as we would be fine with raising alcohol taxes across the board to as high as $31/proof-gallon for all beverage types. A combination of both would also be good as well. Given how moderate and responsible drinkers would barely be affected at all by either measure as noted (as long as the thresholds are not set much higher than the ones above), they hardly qualify as blunt instruments and are in fact highly efficient in practice. That's a small price to pay for liberty.
* One "standard American drink" or "standard unit" of alcohol is equal to one measure of the following: one 12 ounce can/mug/glass of beer at 5% ABV, one 5 ounce glass of wine at 12% ABV, or one 1.5 ounce shot of distilled spirits at 80 proof (40% ABV). This is known as alcohol equivalence. Contrary to popular opinion, these all contain the same amount of alcohol. So keep this in mind if or when you drink.
OTHER DRUGS AND VICES
What about other substances and vices? We know that cigarette taxes are a highly efficient way to reduce smoking rates across the population, with the largest effects in young people. Higher taxes mean higher prices, which mean that more smokers quit and fewer people take up the habit in the first place, all else being equal. Not only do higher cigarette taxes/prices lead to less smoking, but due to cross-elasticity it can also lead to lower consumption of alcohol (and possibly other substances) as well.
But how about nicotine vaping products? There is no reason to believe that these products would be very different in terms of how consumers respond to price, but from a Pigouvian and public health perspective, we must be cautious to NOT tax them any higher than, or even close to, the level of combustible tobacco products, since the latter are far more dangerous than vape products. (The Law of Unintended Consequences is very real, in fact.)
As for cannabis, many states have learned the hard way that overtaxing and overregulating it from the start encourages the black market to persist for years after legalization. Thus, it is best to "start low, go slow" in terms of taxes on newly-legalized cannabis, say no more than $10/ounce for bud and $2.50/ounce for leaf/trim, and only after two or three years then jack up the taxes to $50/ounce or so for bud and $10-15/ounce or so for trim, and perhaps an additional surtax on high-potency (>10% THC) products. For edibles, vapes, and concentrates, the tax should be based on THC content. But ultimately, taxing it more heavily than alcohol and tobacco (which are more dangerous than cannabis and have higher social costs) is likely counterproductive on balance.
Soda and other beverages with added sugar are another products that is subject to vice taxes in recent years. And the evidence so far has been rather promising, showing a decrease in consumption in places where such taxes have been implemented.
And last but not least, let's not forget about the "attention economy" as well. Taxing the advertising revenue from the digital advertising that funds Big Tech will go a long way towards taming its dark side. As for raising the age limit for social media, if they do (and that is debatable) it should not be any higher than 16, as that would do more harm than good.
The "powers that be" are an oppressive group of people. This is a group of people from organizations and from government who only want treat people who are 18-20 years old as children. It is tyranny. The drinking age, smoking age and Cannabis smoking age should be lowered to 18 in this country. If the "powers that be" really wanted to significantly reduce alcoholism, then minimum unit pricing would be a good answer in significantly reducing alcoholism.
ReplyDeleteAgain, I must agree. Taxation always works far better than Prohibition. It makes sense practically and economically as you are generating revenue rather than wasting money trying to enforce an unenforceable law.
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