Alcohol price increases involve raising the unit price of alcohol by raising excise taxes (often included in the price of alcohol) and/or sales taxes (charged in addition to the price of alcohol). The revenue generated from tax increase(s) can be used to support public health and public safety services.
To reduce commercial demand for and access to alcohol among underage youth
- Four categories of state alcohol taxes include (Substance Abuse and Mental Health Services Administration [SAMHSA], 2012):
- Specific excise tax: Applied per gallon at the wholesale or retail level. Generally highest for spirits (ranging from $1.50 to $12.80/gallon) and lowest for beer (ranging from $0.02 to $1.07/gallon), with wine falling in between (ranging from $0.11 to $2.50/gallon).
- Retail ad valorem excise taxes: Percentage of the alcoholic product’s retail price (also known as gross receipts/proceeds or retail receipts/ proceeds). Different rates apply to on- and off-premise sales, ranging from 2% to 15% for spirits and wine and from 1% to 17% for beer.
- Sales tax: Tax not specific to alcoholic beverages.
- Sales tax adjusted retail ad valorem excise tax: Equals the retail ad valorem excise tax (above) minus unlevied (i.e., unimposed) sales tax. This provides an accurate index of the actual tax reflected in the retail price and is sometimes used instead of sales tax.
- Tip: Go to the Alcohol and Tobacco Tax and Trade Bureau website for the most up-to-date information about taxes in your state.
- Variation by certain criteria. States can have fluctuating tax rates based on alcohol content, container size, or geographic location for beer, wine, or distilled spirits (SAMHSA, 2012).
- Note: Specific tax rates are not reported for states where alcohol is sold in state-run retail stores or through state-run wholesalers. In these cases, the state sets a price that combines cost, markup, and taxes, and you can’t determine the dollar amount associated with each component (SAMHSA, 2012).
- Stakeholders supportive of price increases (Gabriel et al., 2008).
- Communication campaign to build stakeholder support for alcohol price increases (see Media Advocacy):
- Educational materials based on research and reliable data about effectiveness of alcohol price increases (Imm et al., 2007).
- Talking points for supporters to use when discussing price or tax increases (Gabriel et al., 2008).
- Youth under age 21
- Adults who drink alcohol
- Alcohol price increases have been associated with reductions in:
- Harmful youth drinking (Chaloupka & Laixuthai, 1993; Coate & Grossman, 1986; Grossman, Chaloupka, Saffer, & Laixuthai, 1994; Hollingworth et al., 2006; Williams, Chaloupka, & Wechsler, 2005)
- Youth drinking through its effect on adult alcohol consumption (Xuan et al., 2013)
- Alcohol price increases have been linked to reductions in the following potential consequences of underage drinking:
- Sexually transmitted infections and diseases among youth and young adults (Chesson, Harrison, & Kassler, 2000; Luong & Sen, 2008; Markowitz, Kaestner, & Grossman, 2005; Wagenaar, Tobler, & Komro, 2010)
- Traffic fatalities involving youth (Grossman, Chaloupka, Saffer, & Laixuthai, 1994; Grossman & Saffer, 1986; Ponicki, Gruenewald, & LaScala, 2007; Young & Bielinska-Kwapisz, 2006)
- Violence and crime on college campuses (Grossman & Markowitz, 1999; Wagenaar et al., 2010)
Chesson, H., Harrison, P., & Kassler, W. J. (2000). Sex under the influence: The effect of alcohol policy on sexually transmitted disease rates in the United States. Journal of Law and Economics, 43(1), 215–238.
Chaloupka, F. J., & Laixuthai, A. (1993). Youth alcohol use and public policy. Contemporary Policy Issues, 11(4), 70–81.
Coate, D., & Grossman, M. (1986). Effects of alcoholic beverage prices and legal drinking ages on youth alcohol use. Retrieved from http://www.nber.org/papers/w1852.pdf?new_window=1
Gabriel, R., Becker, L., Leahy, S. K., Landy, A. L., Metzger, J., Orwin, R., . . . Stein-Seroussi, A. (2008, April 30). Assessing the fidelity of implementation of the Strategic Prevention Framework in SPF SIG-funded communities: User’s guide and fidelity assessment rubrics (version 2).
Grossman, M., & Markowitz, S. (1999). Alcohol regulation and violence on college campuses. Retrieved from http://www.nber.org/papers/w7129.pdf?new_window=1
Grossman, M., & Saffer, H. (1986). Beer taxes, the legal drinking age, and youth motor vehicle fatalities. Retrieved from http://www.nber.org/papers/w1914.pdf?new_window=1
Grossman, M., Chaloupka, F. J., Saffer, H., & Laixuthai, A. (1994). Effects of alcohol price policy on youth: A summary of economic research. Journal of Research on Adolescence, 4(2), 347–364.
Hollingworth, W., Ebel, B. E., McCarthy, C. A., Garrison, M. M., Christakis, D. A., & Rivara, F. P. (2006). Prevention of deaths from harmful drinking in the United States: The potential effects of tax increases and advertising bans on young drinkers. Journal of Studies on Alcohol, 67(2), 300–308.
Imm, P., Chinman, M., Wandersman, A., Rosenbloom, D., Guckenburg, S., & Leis, R. (2007). Preventing underage drinking: Using Getting To Outcomes™ with the SAMHSA Strategic Prevention Framework to achieve results. Retrieved from http://www.rand.org/content/dam/rand/pubs/technical_reports/2007/RAND_TR403.pdf
Luong, M., & Sen, A. (2008). Estimating the impact of beer prices on the incidence of sexually transmitted diseases: Cross-province and time series evidence from Canada. Contemporary Economic Policy, 26(4), 505–517.
Markowitz, S., Kaestner, R., & Grossman, M. (2005). An investigation of the effects of alcohol consumption and alcohol policies on youth risky sexual behaviors. The American Economic Review, 95(2), 263–266.
Ponicki, W. R., Gruenewald, P. J., & LaScala, E. A. (2007). Joint impacts of minimum legal drinking age and beer taxes on US youth traffic fatalities, 1975 to 2001. Alcoholism: Clinical and Experimental Research, 31(5), 804–813.
Substance Abuse and Mental Health Services Administration (SAMHSA). (2012, November). Alcohol pricing policies. In Report to congress on the prevention and reduction of underage drinking (4.3.19). Retrieved from https://alcoholpolicy.niaaa.nih.gov/sites/default/files/imce/users/u1743/stop_act_rtc_2017.pdf
Wagenaar, A. C., Tobler, A. L., & Komro, K. A. (2010). Effects of alcohol tax and price policies on morbidity and mortality: A systematic review. American Journal of Public Health, 100(11), 2270–2278.
Williams, J., Chaloupka, F. J., & Wechsler, H. (2005). Are there differential effects of price and policy on college students’ drinking intensity? Contemporary Policy Issues, 23(1), 78–90.
Xuan, Z., Nelson, T. F., Heeren, T., Blanchette, J., Nelson, D. E., Gruenewald, P., & Naimi, T. S. (2013). Tax policy, adult binge drinking, and youth alcohol consumption in the United States. Alcoholism: Clinical and Experimental Research, 37(10), 1713–1719.
Young, D. J., & Bielinska-Kwapisz, A. (2006). Alcohol prices, consumption, and trafﬁc fatalities. Southern Economic Journal, 72 3), 690–703.