Commentary on the Impact of a 25-Cent-Per-Drink Alcohol Tax Increase

Abstract

The recent article by Daley et al. advocates large increases in alcohol taxes claiming both public health benefits from reduced consumption and that almost all of the cost would be borne by high-risk drinkers. The authors rely on the assumption that the majority of drinkers impose external costs on society and that the majority of drinkers would benefit if they reduced their consumption. Neither of these assumptions holds up under scrutiny.

The authors also fail to consider how higher taxes harm moderate drinkers. Not only will moderate drinkers lose the enjoyment of drinks not consumed, but many would lose the positive health benefits from moderate drinking as well. One should not attempt to engage in cost-benefit analysis while ignoring the benefits side of the equation. It appears that the Daley et al. assumptions favoring higher alcohol taxes drive their results.

Keywords: economics of alcohol

JEL Classification: I12, I18