Does Raising Taxes on Alcohol Save Lives?

Today’s review post is a fascinating study regarding alcohol consumption, implementation of excise taxes, and effects on alcohol-related death trends in the United States.  It is relatively lengthy, but it was so chock full of facts that I was unaware of, that I wanted to share all of their findings with you.  There could be some political implications in the findings of this study as well, since taxes are always a hot topic in election campaigns.

The title of the paper for review today is: 

The effect of alcoholic beverage excise tax on alcohol-attributable injury mortalities; by C.H. Son and K. Topyan

Please feel free to leave comments below!

Introduction

Demographics

For those individuals who consume alcohol, they tend to have preferences toward a specific type, and will often stick with that preference for their entire lives.  Studies have found that wine drinkers tend to have a better quality of life, and lower mortality in old age (which is a topic I will likely pursue in a separate blog post in the future).  Also, wine drinkers are more often older, more educated, female, more affluent, non-smokers, drink in the privacy of their own home, and drink less often than beer or spirit drinkers.  Finally, wine drinkers are more often likely to avoid drinking and driving, and have overall better health.

Spirit drinkers tend to be men, drink more heavily, are middle-aged or older, are less educated, and often have risk factors for major diseases or illnesses.  Spirit drinkers consume more than beer or wine drinkers, and tend to be more emotional and aggressive than non-spirit drinkers.  Those consuming either spirits AND beer (or just beer) had more alcohol-related issues than non-spirit or beer drinkers.

Beer drinkers were the group most likely to drink and drive, be arrested for drunk-driving, and most likely to be involved in alcohol-related accidents.  Young men tended to make up the primary demographic of beer drinkers.

Alcohol and Violence/Injury

(Note:  all statistics are for the United States)

As a result of the demographics analysis, it is often suggested that consumption of different types of alcoholic beverages may be good predictors of crime rates.  Studies have shown that there is a significant relationship between beer and spirits sales and the assault rate, with the homicide rate increasing with more spirits sold.  Wine sales, on the other hand, were not linked to any type of violence.

In regards to injuries, wine drinkers are less likely to be injured than those drinking beer or spirits, whereas beer drinkers were more likely to report some form of alcohol-related injury.  Only those consuming cask wine (poor quality wine often found in larger containers) or high alcohol beer were related to assault and acute alcohol-related morbidity.

In summary, studies to date have found that people have varying preferences for their alcoholic beverage of choice, and that the consequences and alcohol-related harmful effects of those choices vary depending upon the specific type of beverage.  This current study looks into this phenomenon, using information for 32 states in the United States from 1995-2004, and limited the ages of individuals in the study from 25-64.

Excise Tax on Alcohol and Alcohol-Related Injury

Many studies to date have used state excise tax on alcohol information as a proxy for the retail price of alcohol, and used in order to analyze alcohol-related injuries.  Basically, the state excise tax affects the cost of the alcohol uniformly, no matter where it is sold.  It is known that any increase in the excise tax on alcohol results in an increase in the retail price of alcohol within three months.  After an increase in price of alcohol, it has been shown that the probability of drinking and driving decreases. Therefore, it can be concluded that an increase in state excise taxes on alcohol will lower alcohol-related mortality.

Specifically, increasing the excise tax on beer had a negative influence on alcohol-related mortality.  By increasing the price of beer, one is effectively decreasing the amount of beer consumed by an individual.  This decrease in beer consumption is thereby associated with the shown decrease in alcohol-related vehicle death rate.

Income

Studies have also looked at income factor on alcohol-related death rates and found that people with higher incomes were safer drivers, owned cars with better safety features, and had fewer alcohol-related vehicle accidents.

Cigarette Use

Studies have shown that those who drink more also tend to be more tobacco dependent, and that smokers were more likely to consume alcohol in higher amounts than non-smokers.  It can be inferred then, that higher cigarette taxes may also decrease alcohol consumption, in addition to decrease cigarette use.  Therefore, higher cigarette taxes may also contribute to lower alcohol-related deaths.

Suicide

Alcohol consumption has been shown to be a factor in suicide attempts.  38% of those attempting suicide had consumed alcohol within three hours of the attempt. 

Suicide rates are also positively associated with per capita consumption of alcohol. 

Both income and unemployment are significantly related to suicide rate, and are both associated with higher alcohol consumption (really?  One would think the opposite, since income and unemployment are total opposites!).

Homicide

Since alcohol excise taxes affect alcohol consumption, and if alcohol consumption is related to homicide rates, then one could argue that alcohol excise taxes should result in a decrease in the homicide rate.  Studies have shown support for this idea, and that between 1934 and 1995, there were declines in homicide rates whenever there was an increase in excise taxes on alcohol.  Other studies have shown that changes in alcohol consumption results in a change in the assault rate. 

This trend, however, is not seen for every type of alcohol.  This relationship of increased excises taxes on alcohol and an associated decrease in homicide rates were only significant for spirits, and not for beer and wine

Overall Goal of the Study

The overall goal of the study under review was to analyze the effect of state excise taxes on different types of alcoholic beverages on alcohol-related deaths (motor vehicle accidents, suicides, homicides, and falls) in the United States between 1995 and 2004.

Methods

There is a lot of information in the methods section of this paper, and due to the sheer length, it does not make sense for me to review it in detail for this blog post.

The authors looked at causes on injury deaths in the United States, and focused on the alcohol-related portion of it.  They also looked at state excise tax implementation, and looked for trends between the two.

The authors report many statistics regarding alcohol-related deaths in the United States, and show overall trends for the categories of motor vehicle deaths, suicide, homicide, and falls.  In general, there are decreases in all of the categories, however, for a more detailed analysis, I’d recommend viewing the methods yourself, or if you’d like a specific piece of information, leave a comment below and I’ll gladly look it up for you.

The authors also presented an empirical mathematical model of alcohol-related injury death rates, which I will refrain from discussing at this point (though again, if you’d like to see the model, just ask!).

Results

There are many results of this study, so I will only present the more major findings for you here.  Feel free to comment if you’d like to know more details:

·         The effect of beer taxes on motor vehicle deaths is negative and statistically significant one year after the taxes had been implemented.  In other words, increase the beer tax, see a decrease in motor vehicle deaths one year later.

o   Implications are that a 10% increase in beer tax by state governments would lower the number of motor vehicle accident deaths by 2.2% (or 22 per 100,000 individuals) in the following year.

·         The effect of state excise taxes on beer and spirits is not significantly associated with suicides.  However, the effect of state excise taxes on wine is negative and statistically significant.  In other words, increase the wine tax, and see a decrease in suicides. 

o   Attempted suicide is often caused by emotional distress.  Therefore, drinking wine may be associated with a lower control of emotions than other types of alcoholic beverages.  More research would need to be done in order to confirm or refute this idea that the authors of the study bring forth.

·         There is no significant relationship between excises taxes on alcohol and homicide rates.

·         The effect of state excise taxes on spirits is positive and statistically significantly related to alcohol-related fall deaths, however the effect of state excise taxes on wine is negative and statistically significantly related to alcohol-related fall deaths.

o   The authors suggest that an increase in state excise taxes on spirits implies an increase in wine consumption as a result of the substitution effect as a result of the increase in spirit taxes.  In other words, lower priced wine becomes a substitute for higher priced spirits when there is an increase in alcohol excise tax.

§  This explains why wine drinkers are much less likely to switch their alcohol beverage of choice, since they can simply switch to a lower priced wine.

Final Thoughts

The results of this study show that by increasing excise taxes on alcohol, there are positive effects on the number of lives saved due to decreased alcohol-related motor vehicle accidents (with beer taxes) and suicides (with wine taxes) and falls (spirit taxes).  State governments would also benefit, not only because of the lives saved, but also as a result of the increased revenue they would be getting from the alcohol excise taxes.

The topic of taxes is often heated, and when one brings up the subject of imposing higher taxes on alcoholic beverages, there is bound to be a lot of debate.  Yes, it’s inconvenient to have to pay more for your alcohol, but if it is most inconveniencing those who would have otherwise cause a motor vehicle accident or suicide, I’m quite alright with that!  Paying a little bit more for my wine is worth it to me, when I can potentially avoid injury (or even death) as a result of being hit by a drunk driver.

Please feel free to leave comments below!

Full Citation:  Son, C.H., and Topyan, K. 2011. The effect of alcoholic beverage excise tax on alcohol-attributable injury mortalities. European Journal of Health Economics 12: 103-113.

I am not a health professional, nor do I pretend to be. Please consult your doctor before altering your alcohol consumption habits. Do not consume alcohol if you are under the age of 21. Do not drink and drive. Enjoy responsibly!

2 comments for “Does Raising Taxes on Alcohol Save Lives?

  1. Mike
    June 22, 2011 at 2:13 pm

    Good post! There's an attempt in Virginia to sell off the ABC stores and liquor sales, but it would cost the state a source of revenue, and small mom-and-pop stores are worried that big-box grocers would monopolize all the permits.

  2. June 22, 2011 at 2:21 pm

    I've heard about the privatizing of the ABC stores in VA as well. VA would end up getting some 500 million (plus or minus) for the sale of the stores, but then they'd still get the taxes on the alcohol, so really, I don't think that they would be losing any revenue (though I haven't done extensive research on the subject, so I don't know exact numbers.

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