Do Alcohol Taxes Save Lives?
On January 1, 1991, the federal excise tax on beer doubled, and the tax rates on wine and liquor increased as well… we expect that the proportional effects of the federal tax increase on traffic fatalities would be positively correlated with per capita consumption. We demonstrate that this is indeed the case, and infer estimates of the price elasticity and lives saved in each state. We repeat this exercise for other injury-fatality rates, and for nine categories of crime. For each outcome, the estimated effect of the tax increase is negatively related to average consumption, and that relationship is highly significant for the overall injury death rate, the violent crime rate, and the property crime rate. A conservative estimate is that the federal tax reduced injury deaths by 4.7%, or almost 7,000, in 1991.
NBER study here. Pointer from Greg Mankiw.
John, are you promoting high taxes?
Ken, I report. You decide.
You’ll notice that the study doesn’t focus on the disproportionate impact of alcohol taxes on the poor and lower middle class. It’s a sweet deal for Congress and state legislatures: tax the poor and tell them it’s for their own good. The icing on the cake?–They actually believe you and vote for your reelection!
Of course, sooner or later people will quit drinking or markedly reduce their consumption of alcohol, and that will sober up taxpayers in more ways than one. But I have great confidence in government to find new ways to tax all of us.
The government will certainly use figures like these as inspiration for other taxes on consumable products, with the goal of making people healthier.