Study finds alcohol tax increases beneficial to public health
By Ashley Booker
April 27, 2015
Researchers from the University of Florida recently found that increasing alcohol taxes decreased alcohol-related car crashes and related health problems. These same researchers say Kansas could see similar benefits if legislators approve Gov. Sam Brownback’s proposed tobacco and alcohol tax increases.
The increases are part of a package to help the state close a deficit of about $750 million. “I think there is little question that the state can expect a health benefit, reduced deaths, reduced injuries and reduced health care costs associated with those as a result of this tax increase,” said Alex Wagenaar, first author of the study and a professor in the department of health outcomes and policy at the University of Florida’s College of Medicine.
Wagenaar said when an alcohol tax is increased, higher prices cause people to change their drinking habits, which in turn affects alcohol-related death rates and injuries.
His study found that after Illinois in 2009 increased taxes on beer, wine and spirits, it saw a 26 percent reduction in monthly rates of fatal alcohol-related car crashes.
The Journal of Public Health released the study mid-March, and it will be published in an upcoming issue. The decrease was much the same for drivers who were alcohol-impaired and extremely drunken drivers, at 22 percent and 25 percent. Younger drivers saw large declines in fatal alcohol-related accidents, at 37 percent. Wagenaar said the effect wasn’t limited to certain demographics; the tax influenced Illinois’ entire driving population.
The Kansas proposal, Senate Bill 233, would increase the alcohol tax on gross receipts, or total revenue, from 8 percent to 12 percent for retailers and distributors. The tax would be tacked on to liquor store purchases and supply orders from bars and restaurants, which researchers say typically recoup that through higher prices for consumers.
Wagenaar said while the 2009 Illinois tax is different than Brownback’s proposed tax, Kansas will still see similar effects on health. “The health effects are based on the tax increasing the price of alcohol and that leading to a change in people’s drinking patterns,”
Wagenaar said. “And that change in drinking is what ripples through and saves lives and reduces injuries.”
Christopher Mann, a member of the Mothers Against Drunk Driving Kansas Advisory Board and its national board of directors, said MADD doesn’t have a position on the alcohol tax bill because the tax money earned doesn’t cover alcohol misuse or prevention programs.
But he said the bill would have a positive impact if it functions as researchers say it might. “Any decrease in fatalities or injuries related to drunk or impaired driving is a win for all (drunk driving) victims in Kansas, or across the nation,” Mann said.
Wagenaar said to save lives, the tax should be increased regularly to keep up with inflation. The problem with the Illinois tax is that it was a one-time increase in cents per gallon, he said, and after a few years of inflation it won’t amount to much. “Alcohol is so inexpensive now,” Wagenaar said.
“Because these taxes by and large have not been adjusted for inflation.” Because it would be levied as a percentage of sales, the proposed Kansas tax would keep up with inflation. Researchers at Johns Hopkins Bloomberg School of Public Health created an online tool to help people see how alcohol tax increases would affect customers and future jobs within their state.
David Jernigan, an associate professor at Johns Hopkins who helped create the tool, said the proposed Kansas tax on gross receipts is most comparable to the web tool’s 5 percent sales tax increase, which shows excessive drinkers will pay more than three-fourths of the tax. “Sellers of alcohol generally do pass these taxes on to the consumer, and the heaviest consumers will pay the most tax,” he said.
One of the arguments opponents have used is that the tax would be regressive — a tax that takes a larger percentage from low-income people — but Jernigan said that’s not the case.
“Unlike a lot of other health behaviors, alcohol use tends to rise with income,” he said. “In particular, in most states, binge drinking is common among people who make over $75,000 per year — which means these taxes are often much less regressive than people often think they are.”
If the Kansas tax functions like the sales tax in the tool, Jernigan said it could generate about 750 jobs as it brings more money into the state’s general fund. Impact on health Wagenaar conducted a review in 2010 that studied articles involving the effects of alcohol tax and price on many social and health problems. He found that alcohol tax increases resulted in declines in chronic diseases such as cirrhosis and esophageal cancer and reduced sexually transmitted infections, motor vehicle crashes, injuries and violence.
Because states haven’t adjusted their taxes with respect to inflation, Wagenaar said the price of alcohol has not increased as much as that of other items. He said prices are so cheap that, when adjusted for inflation, “many alcoholic beverages are half or three-fourths as expensive as what they were a couple decades ago.”
Keeping alcohol inexpensive is what encourages drinking and in turn raises costs that communities have to pay for emergency services and health care, Wagenaar said.
When drinkers get behind a wheel or cause injuries, they or others may be sent to the emergency room, which involves the police or ambulance services. This comes with a price, Wagenaar said, that the community subsidizes. “It’s entirely fair that the people who choose to drink pay the total cost of what that product is causing for the communities in which they live,” Wagenaar said, speaking primarily about those who drink heavily.
According to the U.S. Department of Transportation, 10,322 people died in alcohol-impaired-driving crashes in 2012 — 444 more than the year before. Concerns with bill Opponents of the Kansas tax say that alcohol drinkers will go across the state line to obtain their alcohol for a lower price rather than change their drinking habits. Rodger Woods, deputy state director for
Americans for Prosperity Kansas, provided written testimony against Senate Bill 233 that said northeast Kansas retailers will have to deal with smuggling and illegal distribution, while competing with Missouri stores that don’t have a special alcohol sales tax, and a gas tax that is 7 cents lower.
“The cumulative effect of these tax imbalances makes a trip across the border more enticing and worth a longer drive,” Woods said. Mann, from MADD, said that could pose an unintended consequence, as people drive across the state border while intoxicated. Woods’ testimony also questioned the wisdom of balancing the state budget by taxing dangerous social behaviors like heavy drinking. He said such taxes “actually create a reverse incentive as government becomes reliant on these behaviors for revenue.”
“It is a bad public policy to stake programs on an uncertain revenue source such as ‘sin’ taxes,” he said in the testimony. Alcohol wholesalers say the bill won’t cause Kansans to drink less so much as change what they drink. Amy Campbell, a lobbyist for the Kansas Association of Beverage Retailers, said when alcohol drinkers had less expendable income during the recent recession, they didn’t stop drinking.
Instead, they started drinking cheaper products. R.E. “Tuck” Duncan, a lobbyist for the Kansas Wine and Spirits Wholesalers Association, said that makes the alcohol tax an unstable revenue source. “The increase in the tax rate could be counterproductive, for lower-priced products will generate less tax,” Duncan said. Wagenaar said some people who are drinking a top-shelf distilled spirit might instead buy a mid-shelf product, but that doesn’t change the overall conclusions reached in his data analysis.
He said the research shows the proposed alcohol tax will change some drinking habits and save more lives. “For scientists who have no vested interest in selling alcohol, the results pretty consistently come out that these taxes do have an effect, they do affect consumption and that ripples through, and they do affect these health problems,” Wagenaar said.
Related: A study released last year by the Kansas Health Institute, the parent organization of the editorially independent KHI News Service, found that expanding liquor licenses in the state has the potential to increase underage drinking, unless the expansion is accompanied by other regulatory controls. Other public health impacts could include an increase in traffic fatalities and sexually transmitted diseases, according to the study.
Ashley Booker is an intern for KHI News Service in Topeka, a partner in the Heartland Health Monitor team.