Alcohol Excessive Consumption: Increasing Alcohol Taxes

Summary of CPSTF Finding

The Community Preventive Services Task Force (CPSTF) recommends increasing the unit price of alcohol by raising taxes to reduce excessive alcohol consumption and related harms. Public health effects are expected to be proportional to the size of the tax increase.

Intervention

Alcohol excise taxes affect the price of alcohol, and are intended to reduce alcohol-related harms, raise revenue, or both. Alcohol taxes are implemented at the state and federal level, and are beverage-specific (i.e., they differ for beer, wine, and spirits). These taxes are usually based on the amount of beverage purchased (not on the sales price), so their effects can erode over time due to inflation if they are not adjusted regularly.

CPSTF Finding and Rationale Statement

Read the CPSTF finding.

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About The Systematic Review

The CPSTF finding is based on evidence from a systematic review of 73 studies (search period through October 2007).

The review was conducted on behalf of the CPSTF by a team of specialists in systematic review methods, and in research, practice, and policy related to preventing excessive alcohol consumption.

Summary of Results

More details about study results are available in the published evidence review.

The systematic review included 73 studies.

  • The studies looked at the relationship between either tax rates or total price and measures related to excessive alcohol consumption or its related harms.
  • The effects of prices on consumption or other outcomes are often expressed as “elasticities,” that are defined as the expected percentage change in the outcome when the price increases by 1%. For example, an alcohol price elasticity of -0.50 would mean that the outcome of interest (e.g., alcohol consumption) would be expected to decrease by 5% for every 10% increase in price.

Alcohol price and per capita consumption

  • Price elasticity of alcohol consumption (i.e., the expected percentage change in alcohol consumption when the price increases by 1%)
    • Beer consumption: -0.50 (18 studies)
    • Wine consumption: -0.64 (22 studies)
    • Spirits consumption: -0.79 (21 studies)
    • Total alcohol (ethanol) consumption: -0.77 (11 studies)
  • Price and consumption by high school or college age youth
    • Six studies found consistent evidence that higher alcohol prices were associated with less youth drinking; three studies found mixed results (9 studies).

Alcohol price and alcohol-related harms

  • Higher alcohol prices or taxes were consistently related to
    • Fewer motor vehicle crashes and fatalities (10 of 11 studies)
    • Less alcohol-impaired driving (3 of 3 studies)
    • Less mortality from liver cirrhosis (5 of 5 studies)
    • Less all-cause mortality (1 study)
  • Effects also were demonstrated for measures of violence (3 studies), sexually transmitted diseases (1 study), and alcohol dependence (1 study).

Summary of Economic Evidence

More details about study results are available in the published evidence review.

The economic review included two studies that assessed the economic costs and benefits of alcohol tax intervention. All monetary values are reported in 2007 U.S. dollars.

  • Cost-effectiveness was measured using disability-adjusted life-years (DALYs), which express both time lost due to premature death and time spent disabled by disease or accidents.
  • Alcohol tax of 20% of the pretax retail price offered net cost savings (one study).
  • Intervention costs were $482,956 per 1 million people per year and the average cost-effectiveness ratio was approximately $395 per DALYs averted, a good value for money based on the per capita income of included countries (one study)

Applicability

The CPSTF finding should be applicable to high-income countries.

Evidence Gaps

The CPSTF identified several areas that have limited information. Additional research and evaluation could help answer the following questions and fill remaining gaps in the evidence base. What are evidence gaps?
  • Do changes in alcohol prices differentially affect drinking behavior and health outcomes for important subgroups of the population, such as underage young people?
  • What are the relative benefits of increasing taxes on all alcoholic beverages simultaneously, compared with selectively increasing taxes on specific beverage types? This research question should be considered in light of known differences in the beverage preferences of binge drinkers, historic changes in tax rates across beverage types, and the effect of inflation on real tax rates by beverage type.
  • What is the impact of different approaches to taxing alcoholic beverages on excessive alcohol consumption and related harms? Specific emphasis should be placed on the impact of alcohol sales taxes, where taxes are calculated as a proportion of the total beverage price; the potential impact of standardizing alcohol taxes across beverage types based on alcohol content; and the potential impact of alcohol taxes levied by local governments on a per-drink basis in on-premise, retail alcohol outlets (i.e., tippler taxes).

Study Characteristics

  • Most studies assessed total alcohol consumption at the societal level (i.e., per capita alcohol consumption). The design of these studies varied between countries.
    • Most studies conducted outside of the United States used interrupted time series designs. Alcohol taxes in other countries tend to be set at the national level, and as such, it is generally not possible to do intra-country comparisons.
    • In contrast, most of the U.S. studies used a panel study design, in which multiple states were assessed over time, allowing each to serve as a comparison for the others.
  • The remaining studies assessed measures related to excessive drinking (e.g., the prevalence of underage or binge drinking) or alcohol-related harms, the most common being outcomes related to motor-vehicle crashes.

Analytic Framework

Effectiveness Review

Analytic Framework [PDF – 150 kB
When starting an effectiveness review, the systematic review team develops an analytic framework. The analytic framework illustrates how the intervention approach is thought to affect public health. It guides the search for evidence and may be used to summarize the evidence collected. The analytic framework often includes intermediate outcomes, potential effect modifiers, potential harms, and potential additional benefits.

Summary Evidence Table

Effectiveness Review

No content is available for this section.

Economic Review

No content is available for this section.

Included Studies

The number of studies and publications do not always correspond (e.g., a publication may include several studies or one study may be explained in several publications).

Effectiveness Review

Adrian M, Ferguson BS, Her M. Can alcohol price policies be used to reduce drunk driving? Evidence from Canada. Subst Use Misuse 2001;36(13):1923 57.

Adrian M, Ferguson BS. Demand for domestic and imported alcohol in Canada. Appl Econ 1987;19(4):531 40.

Baltagi BH, Goel RK. Quasi-experimental price elasticity of liquor demand in the U.S.: 1960 83. Am J Agric Econ 1990;72(2):451 4.

Beard TR, Gant PA, Saba RP. Border-crossing sales, tax avoidance, and state tax policies: an application to alcohol. South Econ J 1997;64(1):293 306.

Blake D, Nied A. The demand for alcohol in the United Kingdom. Appl Econ 1997;29:1655 72.

Bourgeois JC, Barnes JG. Does advertising increase alcohol consumption? J Advert Res 1979;19(4):19 29.

Chaloupka FJ, Saffer H, Grossman M. Alcohol-control policies and motor-vehicle fatalities. J Legal Stud 1993;22:161 86.

Chaloupka FJ, Wechsler H. Binge drinking in college: the impact of price, availability, and alcohol control policies. Contemp Econ Policy 1996;14(4):112 24.

Chesson H, Harrison P, Kassler WJ. Sex under the influence: the effect of alcohol policy on sexually transmitted disease rates in the U.S. J Law Econ 2000;43:215 37.

Clements KW, Selvanathan S. The economic determinants of alcohol consumption. Aust J Agric Resour Econ 1991;35(2):209 31.

Coate D, Grossman M. Effects of alcoholic beverage prices and legal drinking ages on youth alcohol use. J Law Econ 1988;31(1):145 71.

Cook PJ, Moore MJ. Economic perspectives on reducing alcohol-related violence. Alcohol and interpersonal violence: fostering multidisciplinary perspectives. NIAAA Research Monograph 24. Rockville MD: NIAAA, 1993:193 212.

Cook PJ, Moore MJ. This tax’s for you: the case for higher beer taxes. Natl Tax J 1994;47(3):559 73.

Cook PJ, Ostermann J, Sloan FA. Are alcohol excise taxes good for us? Short- and long-term effects on mortality rates. Working Paper No. 11138. Cambridge (MA): National Bureau of Economic Research, 2005.

Cook PJ, Tauchen G. The effect of liquor taxes on heavy drinking. Bell J Econ 1982;13(2):379 90.

Cook PJ. The effect of liquor taxes on drinking, cirrhosis, and auto accidents. In: Moore MH, Gerstein D, eds. Alcohol and public policy: beyond the shadow of prohibition. Washington (DC): National Academies Press, 1981:255 85.

Decker SL, Schwartz AE. Cigarettes and alcohol: substitutes or complements. Working Paper No. 7535. Cambridge (MA):National Bureau of Economic Research, 2000.

Dee TS. State alcohol policies, teen drinking and traff c fatalities. J Public Econ 1999;72(2):289 315.

Duffy M. Advertising and the inter-product distribution of demand. Eur Econ Rev 1987;31:1051 70.

Duffy M. Influence of prices, consumer incomes, and advertising upon the demand for alcoholic drink in the United Kingdom: an econometric study. Alcohol 1981;16(4):200 8.

Duffy M. The demand for alcoholic drink in the United Kingdom. Appl Econ 1983;15(1):125 40.

Evans WN, Neville D, Graham JD. General deterrence of drunk driving: evaluation of recent American policies. Risk Anal 1991;11:279 89.

Farrell S, Manning WG, Finch MD. Alcohol dependence and the price of alcoholic beverages. J Health Econ 2003;22(1):117 47.

Gius MP. The effect of taxes on alcoholic consumption: an individual level of analysis with a correction for aggregate public policy variables. Penn Econ Rev 2002;11(1):76 93.

Goel RK, Morey MJ. The interdependence of cigarette and liquor demand. South Econ J 1995;62(2):451 9.

Gray D, Chikritzhs T, Stockwell T. The Northern Territory’s cask wine levy: health and taxation policy implications. Aust N Z J Public Health 1999;23(6):651 3.

Grossman M, Chaloupka FJ, Sirtalan I. An empirical analysis of alcohol addiction: results from the monitoring the future panels. Econ Inq 1998;36(1):39 48.

Grossman M, Coate D, Arluck GM. Price sensitivity of alcoholic beverages in the U.S.: youth alcohol consumption. In: Holder H, ed. Control issues in alcohol abuse prevention: strategies for states and communities. Greenwich CT: JAI Press, 1987;169 98.

Gruenewald PJ, Madden P, Janes K. Alcohol availability and the formal power and resources of state alcohol beverage control agencies. Alcohol Clin Exp Res 1992;16(3):591 7.

Heeb J-L, Gmel G, Zurbrugg C, Kuo M, Rehm J. Changes in alcohol consumption following a reduction in the price of spirits: a natural experiment in Switzerland. Addiction 2003;98(10):1433 46.

Heien D, Pompelli G. Stress, ethnic, and distribution factors in a dichotomous response model of alcohol abuse. J Stud Alcohol 1987;48(5):450 5.

Heien DM, Pompelli G. The demand for alcoholic beverages: economic and demographic effects. South Econ J 1989;55(3):759 70.

Hoadley JF, Fuchs BC, Holder HD. The effect of alcohol beverage restriction on consumption: a 25-year longitudinal analysis. Am J Drug Alcohol Abuse 1984;10(3):375 401.

Hogarty TF, Elzinga KG. The demand for beer. Rev Econ Stat 1972;54(2):195 8.

Johnson JA, Oksanen EH, Veall MR, Fretz D. Short-run and long-run elasticities for Canadian consumption of alcoholic beverages: an error-correction mechanism/cointegration approach. Rev Econ Stat 1992;74(1):64 74.

Johnson JA, Oksanen EH. Socioeconomic determinants of the consumption of alcoholic beverages. Appl Econ 1974;6(4):293 301.

Jones AM.Asystems approach to the demand for alcohol and tobacco. Bull Econ Res 1989;41(2):85 101.

Kenkel DS. Drinking, driving, and deterrence: the effectiveness and social costs of alternative policies. J Law Econ 1993;36:877 911.

Kenkel DS. New estimates of the optimal tax on alcohol. Econ Inq 1996;34(2):296 319.

Kuo M, Heeb JL, Gmel G, Rehm J. Does price matter? The effect of decreased price on spirits consumption in Switzerland. Alcohol Clin Exp Res 2003;27(4):720 5.

Labys W. An international comparison of price and income elasticities for wine consumption. Aust J Agric Resour Econ 1976;20(1):33 6.

Laixuthai A, Chaloupka FJ. Youth alcohol use and public policy. Contemp Policy Issues 1993;11(4):70 81.

Lee B, Tremblay VJ. Advertising and the US market demand for beer. Appl Econ 1992;24(1):69 76.

Leskinen E, Terasvirta T. Forecasting the consumption of alcoholic beverages in Finland. Eur Econ Rev 1976;8:349 69.

Levy D, Sheflin N. New evidence on controlling alcohol use through price. J Stud Alcohol 1983;44(6):929 37.

Manning WG, Blumberg L, Moulton LH. The demand for alcohol: the differential response to price. J Health Econ 1995;14(2):123 48.

Markowitz S, Grossman M. Alcohol regulation and domestic violence towards children. Contemp Econ Policy 1998;16(3):309 20.

Markowitz S, Grossman M. The effects of beer taxes on physical child abuse. J Health Econ 2000;19:271 82.

Mast BD, Benson BL, Rasmussen DW. Beer taxation and alcohol-related traff c fatalities. South Econ J 1999;66(2):214 49.

Mayo JR.Anestimate of U.S. demand for alcoholic beverages, 1986 92. Penn Econ Rev 2000;9(1):1 4.

Mullahy J, Sindelar JL. Do drinkers know when to say when? An empirical analysis of drunk driving. Econ Inq 1994;32(3):383 94.

Nelson J, Moran J. Advertising and US alcohol beverage system demand: system-wide estimates. Appl Econ 1995;12:1225 36.

Nelson J. Economic and demographic factors in U.S. alcohol demand: a growth-accounting analysis. Empir Econ 1997;22:83 102.

Nelson J. State monopolies and alcoholic beverage consumption. J Regul Econ 1990;2:83 98.

Ornstein SI, Hanssens DM. Alcohol control laws and the consumption of distilled spirits and beer. J Consum Res 1985;12(2):200 13.

Pacula RL. Does increasing the beer tax reduce marijuana consumption? J Health Econ 1998;17:557 85.

Ponicki W, Holder HD, Gruenewald PRA. Altering alcohol price by ethanol content: results from a Swedish tax policy in 1992. Addiction 1997;92(7):859 70.

Ruhm CJ. Alcohol policies and highway vehicle fatalities. J Health Econ 1996;15:435 54.

Ruhm CJ. Economic conditions and alcohol problems. J Health Econ 1995;14:583 603.

Rush B, Steinberg M, Brook R. Relationships among alcohol availability, alcohol consumption and alcohol-related damage in the province of Ontario and the State of Michigan. Adv Alcohol Subst Abuse 1986;5(4):33 45.

Saffer H, Grossman M. Drinking age laws and highway mortality rates: cause and effect. Econ Inq 1987;25(3):403 17.

Selvanathan EA. Alcohol consumption in the UK, 1955 85: a system-wide analysis. Appl Econ 1988;20(2):1071 86.

Simon JL. Price elasticity of liquor in the US and a simple method of determination. Econometrica 1966;34(1):193 205.

Sloan FA, Reilly BA, Schenzler C. Effects of prices, civil and criminal sanctions, and law enforcement on alcohol-related mortality. J Stud Alcohol 1994;55:454 65.

Speer PW, Gorman DM, Labouvie EW, Ontkush MJ. Violent crime and alcohol availability: relationships in an urban community. J Public Health Policy 1998;19(3):303 18.

Treno AJ, Parker RN, Holder HD. Understanding U.S. alcohol consumption with social and economic factors: a multivariate time series analysis, 1950 1986. J Stud Alcohol 1993;54:146 56.

Uri ND. The demand for beverages and interbeverage substitution in the U.S. Bull Econ Res 1986;38(1):77 85.

Wette HC, Zhang JF, Berg RJ, Casswell S. Effect of prices on alcohol consumption in New Zealand 1983 1991. Drug Alcohol Rev 1993;12(2):151 8.

Whetten-Goldstein K, Sloan FA, Stout E, Liang L. Civil liability, criminal law, and other policies and alcohol-related motor vehicle fatalities in the U.S.: 1984 1995. Accid Anal Prev 2000;32:723 33.

Wilkinson JT. Reducing drunken driving: which policies are most effective? South Econ J 1987;54:322 34.

Yen ST. Cross-section estimation of US demand for alcoholic beverage. Appl Econ 1994;26(4):381 92.

Young C, Bielinska-Kwapisz A. Alcohol consumption, beverage prices and measurement error. J Stud Alcohol 2003;64:235 8.

Zhang JF, Casswell S. The effects of real price and a change in the distribution system on alcohol consumption. Drug Alcohol Rev 1999;18:371 8.

Economic Review

Chisolm D, Rehm J, Van Omeren M, et al. Reducing the global burden of hazardous alcohol use: a comparative cost-effectiveness analysis. J Stud Alcohol 2004;65:782 93.

Miller TR, Levy, DT. Cost-outcome analysis in injury prevention and control: eighty-four recent estimates for the U.S. Med Care 2000;38(6):562 82.

Additional Materials

CDC’s High-Impact in 5 years initiative recommends increasing the unit price of alcohol based on evidence the strategy reduces excessive alcohol consumption and related harms within five years and has economic value.

Search Strategies

The following outlines the search strategy used for these reviews of interventions to prevent excessive alcohol consumption: Dram Shop Liability; Increasing Alcohol Taxes; Maintaining Limits on Days of Sale; Maintaining Limits on Hours of Sale; Overservice Law Enforcement Initiatives; Regulation of Alcohol Outlet Density; Enhanced Enforcement of Laws Prohibiting Sales to Minors.

The following databases were searched from their inception up to October 2007 to identify studies assessing the impact of changes for all interventions included in the Community Guide series of alcohol reviews: Econlit, PsycInfo, Sociology Abstracts, Medline, Embase, and EtOH (not available after 2003). The search yielded 6442 articles, books, and conference abstracts, of which 5645 were unique.

1) Alcohol Keywords

  • (Alcoholic drink$ OR alcoholic beverage* OR alcohol OR liquor OR beer OR wine OR spirits OR drunk OR intoxicat$ OR alcoholic binge* OR binge drinking)

2) Keywords for interventions of interest (assume ORs between bullets) {Target intervention}

  • ((day$ or hour$ or sale$) and (limit$ or sale$ or extend$ or restrict$ or trading)) {Restrictions on days and hours of sale}
    • (day OR hour OR “time of day” OR time) AND (sale* OR trading OR commerce) AND (limit OR restrict OR regulate)
  • (tax or taxes or taxation or cost or costs$ or prices or price) {Increased alcohol taxes}
    • (tax*) AND (increase OR raise)
  • (social and (host$ or liability or provider$ or provision)) {Social host liability}
    • (“social host” OR provider* OR provision) AND (liability OR responsibility)
  • ((underage or minor or youth or young or teenage$) and licens$ and (enforcement or fee$ or driver$)) {License suspension/revocation for non-MV alcohol violations among underage drinkers}
    • (underage OR minor OR youth OR adolescent OR teen*) AND (“drivers license” OR) AND (suspension OR revocation OR revoke) AND (“non-mv alcohol violation” OR (“alcohol violation” NOT (driving OR “motor vehicle”))
  • (privatiz$ or monopol$ or ((sale$ or distribut$ or industry) and (ban$ or strike$ or prohibition))) {Government monopolies on off-premise outlets}
    • (“off-premise”) AND (“government monopoly” OR government OR privatiz* OR monopoly) AND (sale* OR distribut* OR industry)
  • (minimum age or drinking age or purchase age or legal age or MDA or MLDA or ((teen$ or adolescen$ or young or college$ or youth$ or student$ or underage$ or minor$) and (enforce$ or deterrence$ or avail$ or access$ or crackdown or ID or identification or compliance))) {Enhanced enforcement of laws prohibiting possession or consumption of alcohol by minors}
    • (underage OR minor OR youth OR adolescent OR teen*) AND (possess* OR consum* OR access*) AND (law* OR regulat* OR enforce* OR deter* OR crackdown OR complia*) AND (“minimum age” OR “drinking age” OR “purchase age” OR “legal age” OR “MDA” OR “MLDA”)
  • (advertis$ or marketing or promotion$ or internet or product placement or billboard$ or sponsorship) {Limiting advertising exposure}
    • (advertis* OR market* OR promotion* OR internet OR www OR World Wide Web OR “product placement” OR billboard* OR sponsor* OR target*) AND (underage OR minor OR youth OR adolescent OR teen*) AND (limit OR reduc* OR restrict* OR regulat*)
  • (compliance check$ or sting$ or decoy$ or purchase attempt or dram shop) {Enhanced enforcement of laws prohibiting provision of alcohol to minors}
    • (“dram shop” OR “on-premise” OR provider) AND (“compliance check*” OR “purchase attempt*” OR enforce*) AND (law* OR regulat* OR prohibit*) AND (underage OR minor OR youth OR adolescent OR teen*)
  • (((manager$ or management or serv$ or clerk$ or seller$) and (liabilit$ or practice$ or training or beverage$)) or liquor liability) {Responsible beverage server programs/Dram shop liability}
    • (provider OR manage* OR serv* OR “dram shop” OR “on-premise” OR sale*) AND ((liabil* OR responsib*) OR (“responsible beverage server program*” OR training OR program*)
  • (gas station or self service or ((outlet$ or store$ or bar or bars or establishment) and (density or densities or on-sale or off-sale or type or types or number$ or location$ or concentration or zoning))) {Outlet density and zoning restrictions}
    • (“gas station” OR store OR bar* OR establishment* OR sale*) AND (zon* OR restriction* OR regulat* OR law*) AND (dens*)
  • (happy hour$ or liquor by the drink or ladies night or (drink$ and (special$ or discount$ or pric$)) { Decreasing promotional pricing}
    • (promot* OR special OR discount OR “happy hour” OR “ladies night”) AND (pric*) AND (decrease OR restrict* OR regulat* OR limit OR reduc*)

3) Exclusionary keywords

  • (air and quality) or pollution
  • methanol or methyl
  • solvent$

Search for (1) AND (2), NOT (3)

Review References

Wagenaar AC, Salois MJ, Komro KA. Effects of beverage alcohol price and tax levels on drinking: a meta-analysis of 1003 estimates from 112 studies. Addiction 2009a;104:179 90.

Wagenaar AC, Maldonado-Molina MM, Wagenaar BH. Effects of alcohol tax increases on alcohol-related disease mortality in Alaska: time series analyses from 1976 to 2004. Am J Public Health 2009b;99:1464 70.

Considerations for Implementation

The following considerations are drawn from studies included in the evidence review, the broader literature, and expert opinion.
  • Groups with less disposable income, such as underage drinkers, may be more sensitive to changes in alcohol prices than those with more disposable income.
  • While raising alcohol taxes may provide an important source of revenue for governments, such tax increases may be resisted by some industry groups and consumers.
  • Public support for higher alcohol taxes increases substantially when tax revenues are specifically directed to fund prevention and treatment programs instead of being used as an unrestricted source of general revenue.

Crosswalks

Healthy People 2030

Healthy People 2030 icon Healthy People 2030 includes the following objectives related to this CPSTF recommendation.

Health Impact in 5 Years (HI-5)

HI-5 highlights community-wide approaches that have demonstrated 1) positive health impacts, 2) results within five years, and 3) cost effectiveness and/or cost savings over the lifetime of the population or earlier.