Raising Taxes Lowers Drinking Rates

With the health effects of excessive alcohol consumption costing society millions in additional healthcare expenses, one tool lawmakers have to reduce drinking rates is to increase the price of alcoholic beverages by raising taxes, research shows.

The more that alcoholic beverages cost, the less likely people are to drink. When they drink, they are more likely to drink less, if the price increases. This reduction of drinking by increasing taxes is not the finding of one research study, but the conclusion of 112 studies over the past four decades.

Higher Taxes, Less Drinking

In a study of all those studies, published in the journal Addiction, researchers found a consistent link between an increase in alcohol taxes and a reduction in alcohol consumption.

"Results from over 100 separate studies reporting over 1000 distinct statistical estimates are remarkably consistent, and show without doubt that alcohol taxes and prices affect drinking," said Alexander C. Wagenaar, Ph.D., of the University of Florida College of Medicine, in a news release. "When prices go down, people drink more, and when prices go up, people drink less."

Effective Tool in Reducing Drinking

The researcher's meta-analysis of those previous studies found that an increase in tax or price on alcohol reduced drinking among heavy drinkers as well as light drinkers. An increased price affected the drinking rates of both teens and adults.

Therefore, to promote public health by reducing alcohol consumption, the authors of the study recommend raising alcohol taxes. They conclude that raising taxes is more effective in reducing drinking that prevention programs utilized by law enforcement, media campaigns and schools.

Raising Taxes Can Backfire

However, there are some who believe that raising taxes to try to reduce drinking rates can actually backfire. In a previous 2006 study, researchers at the Prevention Research Center found that raising the price of alcohol did not reduce drinking, but rather caused drinkers to simply switch to cheaper brands. In fact, the study concluded that once drinkers switched to less expensive beverages -- for example, from wine to beer -- they might actually drink more than previously.

The Prevention Research Center's study found that increasing taxes on already expensive brands of alcohol had very little effect on drinking rates, because drinkers could easily switch to cheaper drinks. The authors concluded, therefore, that the most effective way to reduce drinking would be to increase taxes on the least expensive alcoholic beverages.

_{Sources:
Wagenaar, A.C., et al. "Effects of beverage alcohol price and tax levels on drinking: a meta-analysis of 1003 estimates from 112 studies." Addiction 15 Jan 2009.}

Gruenewald, P.J., et al. " Alcohol Prices, Beverage Quality, and the Demand for Alcohol: Quality Substitutions and Price Elasticities." Alcoholism: Clinical & Experimental Research January 2006.