Would A Price Floor for Alcohol Be A Good Idea?

With the issue of alcohol taxes now coming to the forefront lately, 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 lesssen 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.

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 $24/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.

Of Death And Taxes, Part Deux

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), 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.  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 moved to lower such taxes as a lesser-known part of the new Republican tax bill.  

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.

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.

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?

Have a Safe and Happy Holiday Season

(This is a public service announcement)

It is that time of year again when the holidays are upon us, and many of us Americans (and around the world) will be celebrating with alcohol and/or other substances.  We at Twenty-One Debunked would like to remind everyone to be safe and celebrate responsibly.  There is absolutely no excuse for drunk driving at any age, period.  We cannot stress this enough.  It's very simple--if you plan to drive, don't drink, and if you plan to drink, don't drive.  It's really not rocket science, folks.  And there are numerous ways to avoid mixing the two.  Designate a sober driver, take a cab, use public transportation, crash on the couch, or even walk if you have to.  Or stay home and celebrate there.  Or don't drink--nobody's got a gun to your head.  Seriously.  And the same goes for other psychoactive substances as well, and a fortiori when combined with alcohol. 

ARRIVE ALIVE, DON'T DRINK AND DRIVE!!!   If you plan to drink, don't forget to think!  The life you save may very well be your own.

Latest 2017 MTF Survey Results

The results of the annual Monitoring the Future survey for 2017 are in.  And here is a brief summary of the results:

• Alcohol use in general as well as "binge" drinking among all three grades (8, 10, 12) remains at the same record-low levels as 2016.  
• Tobacco use overall in all grades continued its long decline to a new record low in 2017, particularly for cigarettes, though vaping (e-cigarettes) did increase slightly in 2017 after decreasing a bit in 2016.
• Cannabis use went up slightly in 2017 from 2016 after declining for several years, though generally still remains below 2012 levels, and of course far below the peaks in both 1979 and 1997.  This dovetails with another recent study of legalization states which found no significant increase in teen use post-legalization.
• Opioids, including heroin, remain at very low levels among teens, while the opioid epidemic continues largely unabated among adults.
• Inhalant use went up slightly among 8th graders after a long decline, though still remains at low levels.
• All other substances decreased or saw no significant change either way in 2017.

So what can we conclude from all of this?  First, we can conclude that cannabis legalization did not increase teen cannabis use as the fearmongers claimed it would. Nor did the use of other substances increase as the "gateway" theory would have predicted--in fact, most other substances decreased.   So much for that theory.  Second, it would appear that e-cigarette vaping is to some extent displacing cigarette smoking, rather than exerting a "gateway" effect as was often feared--smoking would have increased along with vaping if those fears were true, and in fact the opposite has occured instead.  Which any way you slice it, is ultimately a net win for public health even if vaping is not completely harmless.  In fact, the drop in cigarette smoking was much faster from 2013-2015 than it was in the years before or since, coinciding with the period of greatest increase in e-cigarette use.   And finally, we can conclude that the kids are (mostly) alright, at least compared to the many adults around them who continue to drink themselves to death and/or rot and rust in opioids.

For Alcohol, Tobacco, or Cannabis, 18 Is High Enough

Having established that cannabis legalization was not a disaster after all, and that the 21 drinking age has been the greatest alcohol policy failure since Prohibition, it may seem a bit odd that Twenty-One Debunked has grudgingly supported cannabis legalization with a 21 age limit thus far.  The reason for this was, of course, pure pragmatism, as the odds of legalization actually passing with an age limit of 18 would have been almost nil in the critical early years of 2012-2016.  It was, after all, the lesser evil compared with continued prohibition.  But five years and eight states later after the first initiatives passed (albeit narrowly) in November 2012, we feel it is now time to really tackle the issue of cannabis age limits.

To put it bluntly, there is absolutely no legitimate scientific or public health reason why the age limit for cannabis should be any higher than 18.  Zip, zilch, nada.  And while cannabis (though safer than alcohol and tobacco) is not completely harmless, and there is of course some evidence that it can be more harmful before age 18 and especially before 15, there is still no hard scientific evidence that it is any more harmful at 18 than it is at 21, 25, or even 30 for that matter.  Any claims of such are merely glib conjecture rather than real science.  In fact, a recent study by the American Psychological Association on the long term physical and mental health effects of teen and young adult cannabis use should be seen as the final nail in the coffin in that regard.  One possible reason for the null results (i.e. no significant differences between groups regardless of cannabis use trajectory) not always echoed by other studies may be the relative lack of participants who began before age 15 and the relative lack of ultra-heavy users at any age in this study, but overall it should greatly alleviate the worst fears about both legalization itself as well as late adolescent and young adult cannabis use in general.

And after reviewing the most major studies of drugs and drug policy (with cannabis being the most heavily studied of all) throughout history, the results of this recent study should really not come as much of a surprise.  Unless, of course, you have a vested interest in maintaining prohibition and/or are simply a bigoted, intolerant, ageist jerk.  But in that case, you probably wouldn't be caught dead reading this blog.

Additionally, the issue of the black market comes to mind as well.  Given the fact that cannabis use tends to peak around age 18-20 or so, an age limit of 21 would be more likely to encourage at least some persistence of the black market compared with an age limit of 18, particularly if taxes are high.  After all, dealers don't ask for ID, and such an issue for cannabis would be more likely than alcohol or tobacco since the former has had decades of black market history and is less bulky per dose than the other two.   And such dealers would probably continue to sell to people under 18 as well, including in schools, as they currently do under prohibition.  So any concerns about "trickle-down effects" of an age limit of 18 need to be put in such perspective.  Besides, any such "trickle-down" can be greatly curbed by simply capping how much 18-20 year olds can buy in the stores (say, no more than an eighth of an ounce per transaction, and no more than one transaction per day).  You know, kinda like Twenty-One Debunked has long advocated for alcohol sales.

And let's not forget the issue of social cohesion as well.  Few things are more inherently communal than sharing a joint, blunt, bowl, bong, or whatever sort of cannabis smoking implement--in fact, that is literally the origin of the term "joint".  And if the 21 age limit is to be taken seriously to its logical conclusion, it would mean that every time someone over 21 passes it around to someone under 21, a crime has technically been committed.   At least during prohibition, everyone is in the same illegal boat in that regard, but a 21 age limit would divide the 18-24 year old demographic in that regard, potentially inhibiting social cohesion.  Not to mention it gives people over 21 one more thing to "lord it over" people under 21.  At a time in history where social cohesion appears to be at a record low overall, we need that kind of additional division like we need a hole in the head!

But truly the strongest argument of all for an age limit no higher than 18 is one of civil rights.  The age of majority (i.e. legal adulthood) is 18 in nearly all states, and denying legal adults the right to decide what they put into their own bodies has no place in a free society.  Old enough to fight and vote = old enough to drink and toke.  'Nuff said.

Who's Afraid of Cheap, Legal Weed?

Aside from the usual suspects (Big Alcohol, Big Pharma, and of course the illegal drug cartels), who stand to lose the most from cannabis legalization and/or falling cannabis prices, as well as those who simply oppose cannabis in general, there have also been some legitimate public health researchers such as Mark Kleiman who also seem to fear it--specifically the "cheap" part, not the "legal" part.  The fear here is that, while legalization per se may be a non-problem, a large price drop may lead to a significant increase in heavy cannabis use and related problems, at least in theory. But we don't really see much reason to worry.  

Of course, prior to Colorado and Washington's cannabis legalization, there had been a widespread belief that before-tax prices would plummet by at least half, and perhaps even 80% or more, upon legalization or very shortly after.  And yet, that did not happen--yet.  If anything, prices went up at first due to higher demand in the short term, and with or without taxes the prices three years later still have not dropped nearly as much as predicted compared with the status quo ante, at least not at the retail level.

And while the price elasticity of demand for cannabis remains controversial to this day, it is generally thought to be relatively inelastic overall, though estimates vary dramatically.   Note that all estimates were calculated during the time of prohibition and do not always adjust for potency.  There may very well be a relatively "elastic zone" above a certain price point, such as the average price during the 1980s and early 1990s when usage rates dropped, but any further decreases from current levels are squarely in the "inelastic zone".  In fact, even before legalization, the typical cost per buzz-hour was already cheaper than beer.

Still, the long-term trend in cannabis prices does seem to be downward, both in legalization states and nationwide.  And contrary to what the fearmongers like to claim, that is not necessarily a bad thing, given how cannabis is overall safer than alcohol, and generally tends to substitute for it.  Many studies strongly suggest that when one advances, the other retreats, albeit with some nuance.  Cannabis may even take a major bite out our nation's deadly and devastating opioid epidemic as well, according to some studies.  Thus, cheaper weed, especially if it is legal, may very well be a net public health and safety benefit on balance.   And there is also no hard evidence that teen cannabis use has increased as a result of legalization--on the contrary, the latest NSDUH data find that cannabis use among 12-17 year olds nationally has dropped to a 22-year low, even as it has risen significantly among both 18-25 year olds and those 26 and over since 2008.

As for heavy use, the definition of that term varies, but for argument's sake let's use Mark Kleiman's "daily or near-daily" (DND) use definition of 20+ times per month.  He notes how the rate of past-month use among adults is roughly the same as it was in the early 1990s, but within that group the proportion of DND users has apparently increased fourfold by 2014.  And yes, heavy users would be the most sensitive to price as a rule, since they spend a more significant chunk of their incomes on weed than non-heavy users.   But this increase occured almost entirely during prohibition, and now it seems like the market for heavy use is quite saturated even with legalization and falling prices.  So heavy use is unlikely to increase much more (if at all) going forward, regardless of price or legal status.

So how far will the price ultimately fall?  Well, consider this.  Take a look at the price by weight of various products in your local grocery store.  For example, think "parsley, sage, rosemary, and thyme" (like the song), and of course oregano and tea bags--all of which are typically just a few dollars per ounce (which works out to mere pennies per gram), compared to cannabis at $100/oz. for low-grade and $300+/oz. for high-grade (i.e. $1600-5000/lb.) despite it being roughly as easy to grow as basil.  That's a roughly 100-fold difference!  The notable exception to this rule is saffron, which is about $1000-5000/lb. but that is because it is made from just the pistils of the crocus flower and thus requires a LOT of flowers, and a little bit goes a very long way.  But for cannabis, once the industry becomes fully developed, the current artificial scarcity caused by tight regulation and licensing will dissipate, and the inevitable (albeit delayed) drop in price will happen, sooner or later.   Exactly how much is anyone's guess, and depends on supply and demand as well as taxation, but down it will go, most likely by a lot.  Perhaps even so low that a "dime bag" would literally cost a dime (before taxes), though demand would most likely buoy the price at least somewhat higher than that.  

Thus, an 80-90% price crash at some point in the not-too-distant future is really not too farfetched.  If that happens, then the average potency would also likely drop from its currently high levels.  What would be the point of using energy-intensive indoor growing methods to force the THC percentage levels well into the double-digits and even into the twenties, when decent bud can be produced much more cheaply and efficently via outdoor growing or in literal greenhouses?  After all, the whole point of high-potency weed is more "bang for the buck", as well as making it easier to conceal.  At the same time, bunk weed would be, well, weeded out.  And specialty products such as edibles and vape products will likely increase in production, as the cost of producing them will go down due to cheaper crude cannabis prices.

And for those who are concerned about a hypothetical Big Tobacco-style supervillain cannabis industry somehow endangering public health?   Well, if the price really does plummet as much as researchers predict, it would really take the profit out of it at the same time, so this hypothetical "Big Pot" would not get very far.   Thus, Twenty-One Debunked believes "don't fear the reefer", no matter how cheap and readily avaliable it may eventually become.

Cannabis Taxes: Start Low, Go Slow

With several states having legalized cannabis now, and taxing it, what lessons have we learned thus far?  It would seem that the biggest one of all is, "start low, go slow" when it comes to taxes.

As Rear Admiral Luther E. Gregory found out after the repeal of alcohol Prohibition, the black market does not vanish right away, and setting the tax rate too high at first will keep the black market in place, while setting it low to start with will undercut it.  And once the black market is gone, it will not return easily, so then one can raise the tax rate quite high without worrying about the black market making a comeback.  Of course, there is still such a thing as "too high" in that regard, but the threshold for significant black market formation and persistence is much higher afterwards than it is in the very first year or two post-prohibition.

Fast-forward to cannabis legalization in 2014, Colorado and Washington found out the hard way what happens when cannabis excise taxes are too high.  Though otherwise successful, their legalization success was hampered by a fairly persistent black market, albeit smaller than the pre-legalization one.  So they both ended up having to cut their tax rates as a result.  

So why did they start out with such high taxes?  Well, the promise of much-needed revenue certainly helped sweeten the deal for the fence-sitters.   But also, there was a widespread belief that before-tax prices would plummet by at least half, and perhaps even 80% or more, upon legalization or very shortly after.  And yet, that did not happen.  If anything, prices went up at first due to higher demand in the short term, and with or without the taxes the prices three years later still have not dropped very much compared with the status quo ante.  And while the price elasticity of demand for cannabis remains controversial to this day, it is generally thought to be relatively inelastic overall, though estimates vary dramatically.

Still, the long-term trend in cannabis prices does seem to be downward, both in legalization states and nationwide.  And contrary to what the fearmongers claim, that is not necessarily a bad thing, given how cannabis is overall safer than alcohol and generally tends to substitute for it.  Many studies strongly suggest that when one advances, the other retreats, albeit with some nuance.  Cannabis may even take a bite out our nation's deadly and devastating opioid epidemic as well, according to some studies.  Thus, cheaper weed, especially if it is legal, may very well be a net public health and safety benefit on balance.   And there is also no hard evidence that teen cannabis use has increased as a result of legalization--on the contrary, the latest NSDUH data find that cannabis use among 12-17 year olds nationally has dropped to a 22-year low, even as it has risen among both 18-25 year olds and those 26 and over since 2008.

As for specifics as to what the the tax on cannabis should be, it seems that an initial rate of 30% or more on final retail sales like Colorado and Washington originally had is too high to eliminate the black/gray market, and 10-25% is now what most legalization states are aiming for.  Alaska chose a flat $50/oz., which based on the average price of $250/oz. would be about 20%.  There are pros and cons to either method, ad valorem or by weight, and California is apparently combining both types of taxes.  And once the black market is gone after a year or two, then jack the rate up to a level just shy of what would cause a significant black market to return.   But to start with, Twenty-One Debunked recommends a rate of 10% and/or $10-20/oz. for the first year or two before raising it any higher, and perhaps even a "tax holiday" for the first three months of legalization like Oregon did.

Also, once the kinks are worked out, we think it would be a good idea to have the tax rate be at least somewhat proportional to THC levels and perhaps even inversely proportional to CBD levels as well.  For now, though, a simple single rate (whether ad valorem or by weight) will likely be the most workable starting point for any states that are new to legalization.  And if they wish to incentivize THC not being too high or CBD too low, the regulators are free to cap THC levels and/or set a floor for CBD levels.

As for California's idea of having a combination of different taxes (a $9.25/oz. cultivation for flowers, $2.75/oz. for leaves, and a 15% ad valorem tax on retail sales, plus any additional taxes levied by municipalities if they so choose), that's fine.  But both the state and municipalities really might want to consider reducing their rates for the time being, as the combined rates  may be as high as 45% in some parts of California by the time it reaches the consumer.  Ouch.  And unlike in Colorado and Washington, medical cannabis will soon be taxable in California as well, so that's a double ouch.   Best advice?  Municipal taxes shouldn't be too much of an issue, since one can just go to the next town.  But the state should aim for a retail excise tax of 10% and $10/oz. for flowers at the cultivation level.  Ten and ten.  The lower rate for leaves makes sense too, given their generally far lower THC content.  "Start low, go slow."

Of Death And Taxes

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), 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.  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 are currently trying to lower such taxes.  

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.

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 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.

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.  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?

O Cannabis!

The Government of Canada under Prime Minister Justin Trudeau still plans to legalize cannabis nationwide.  Though not finalized yet, it is tentatively set to go into effect sometime in July 2018.  And various provinces are already preparing for it.

As for what the age limits will be, that will be up to the provinces to decide.  The federal age limit will likely be 18, and most provinces have tentatively decided that their own cannabis smoking ages will match their drinking ages (currently 18 in Alberta, Manitoba, and Quebec, 19 elsewhere).  Thus, the age limit for cannabis in Canada will most likely end up being 18 or 19, depending on the province.

For the record, Twenty-One Debunked believes that the age limits for alcohol, tobacco and cannabis should be 18, or at least no higher than that.  We in the USA (where in the growing number of states in which cannabis is legal, the age limit is 21) can really learn a lot from our friendly neighbor to the north!

How to Quash a Black Market in Five Easy Steps

A black market (or underground economy) typically occurs when the legitimate market for a particular good or service is either nonexistent, out of reach, or otherwise far too insufficient to meet the demand for that good or service.  Black markets are by definition illegal to one degree or another, while informal markets that are technically legal or quasi-legal are known as gray markets.   While the usual proximal cause for a black market is prohibition of a good or service (and thus no legitimate market existing), a black market can also occur (albeit to a much lesser extent) when the taxes and/or other government fees on or surrounding the product or activity are excessively high relative to what consumers are willing to pay (and relative to the informal economy).  Sometimes taxes can be so high so as to be considered "prohibition by price", though the relative price difference is typically far more important than the absolute price.

Twenty-One Debunked believes in raising alcohol taxes significantly in conjunction with lowering the drinking age to 18.  The level we suggest ($24/proof-gallon, equalized for all alcoholic beverages), though significantly higher than now, would still be too low to encourage a significant amount of moonshining and bootlegging.  But what about cannabis, which is currently being legalized in more and more states, many of which started out with fairly high taxes and/or licensing fees?  Though a positive development overall, in some of such places, the black market still exists to one degree or another, albeit much less so than when cannabis was illegal.  And of course we all know that places like NYC with extremely high cigarette taxes have their share of black markets in untaxed, out of state, counterfeit, and/or stolen cigarettes as well.  So how does one solve such a problem?

Enter Rear Admiral Luther E. Gregory.  In the 1930s, Prohibition was repealed, and Washington State along with other states were now faced with the task of shutting down the well-established bootleggers and speakeasies that persisted even after Repeal.   Admiral Gregory was asked to head the state's Liquor Control Board, and given carte blanche to come up with a solution, one which worked surprisingly well in fact:

1. End Prohibition, first of all.
2. Give amnesty and issue licenses to anyone willing to play by the state's rules, whether former bootleggers or otherwise.
3. Set the alcohol taxes as low as possible at first, the lowest in the country in fact.
4. Punish sellers who don't play by the rules, with an iron fist--i.e. blacklisting scofflaws from ever selling liquor in the state again.
5. After holding down alcohol taxes for three years, abruptly raise taxes to the point where they're now the highest in the nation.

Problem solved.  The legal market proved to be competitive with what was left of the black market, and drinkers preferred the former over the latter, driving the latter out of business.  And the black market never came back even after raising taxes dramatically.  Looking back, it should have been so obvious indeed.

Substitute "cannabis" for "alcohol", and there is no reason why this strategy would not work in this day and age.  And instead of holding down taxes for three years, merely one year should be sufficient to get the same results, even if the hike is automatically scheduled.  Doing so would minimize the greatest risk of the strategy, namely, that the fledgling legal cannabis industry would then become so powerful that they would resist and successfully quash any attempt to raise taxes in the future.  They would not become that powerful in just one year, and probably not for several years, but the black market could be easily quashed in that timeframe all the same.

As for cigarette taxes, both NYC and NYS should implement this strategy as well.  And of course, the low-tax states such as Virginia should also raise their cigarette taxes (within reason) so as to not be such a source state for cigarette smuggling to other states.  And of course, lower NYC's age limit back to 18 as well.  Same for cannabis in legalized states as well.

In fact, this strategy would work for just about any type of black market.  That's because it is based on the hard facts of economics, not half-baked wishful thinking.  Unlike prohibition or unrealistically high age limits, taxes are not a "blunt" policy instrument, but rather a razor-sharp, double-edged sword.

So what are we waiting for?