Boost Education: Double Alcohol Tax
THE Clinton administration floated trial balloons a while back that one source of financing for its yet-to-be-proposed health program would be "sin taxes" - levies on alcohol and tobacco.
Since then, the word around Washington is that a higher tobacco tax is still a possibility but that a boost in the federal excise tax on liquor, beer, and wine has been shot down.
Studies by several economists, however, indicate that a major hike in liquor taxes would do a lot of good for the nation's youth. That's because an increase in the cost of liquor discourages consumption. This would in turn cut the number of alcohol-related motor vehicle accidents, trim alcoholism, and improve college completion rates.
Less drinking means students are more likely to finish four years of university and less likely to acquire a venereal disease, says Philip Cook, an economics professor at Duke University.
"Drier environments are conducive to a more serious approach to life, to their studies, and to career plans," he says. The easy availability of alcohol "encourages development of views or attitudes which emphasize short-term pleasure over long-term accomplishment."
Too much "partying" puts academic progress at risk, Mr. Cook adds. He approves a mental atmosphere on campuses which makes them "safe for nerds" - those who enjoy studying.
'The benefits of a tax hike are going to outweigh the costs," says Michael Grossman, an economist at the City University of New York. "The optimal tax is more than double the current tax."
With three other economists, Mr. Grossman surveyed the economic literature on the issue (some of which he wrote) in a recent paper published by the National Bureau of Economic Research. They found that an increase in the tax on the pure alcohol in beer from 10 cents an ounce to 25 cents would save about 1,500 lives of 18 to 20-year-olds a year through reduced driving accidents. That higher tax amounts to 81 cents a six-pack.
In January 1991, the federal excise tax rates on beer and wine were increased for the first time since November 1951 from 16 cents a six-pack to 32 cents. This Bush administration measure is saving more than 600 lives a year, the paper indicates.
"The main message of the research on youth alcohol use is that the incidence of frequent consumption and the incidence of heavy consumption are inversely related to the price of alcohol," the paper notes. Its co-authors are Henry Saffer of Kean College of New Jersey, and Frank Chaloupka and Adit Laixuthai of the University of Illinois at Chicago.
Cook's research, done with Michael Moore, a colleague at Duke, is based on a government survey of 12,000 youths in 1979. These individuals were tracked through 1988. Using the characteristics of the youths and their parents which were reported in the survey, the two economists narrowed this group of mostly 17-year-olds down to those most likely to be "college material."
In states where the state beer tax was 10 cents a case, some 14.1 percent of this group completed college. Where the beer tax was 50 cents a case, the number completing college was 15.5 percent. In the states where the beer tax was $1 a case, or five cents a can, 19.4 percent completed college, or 38 percent more. Because the number of states with a $1 tax level was few, Cook regards the last number as somewhat less reliable statistically.
Many states want to improve education levels to make them more attractive to business investment. Cook holds that raising the beer tax would do that and add to state revenues as well.
At the federal level, the present excise tax amounts to 21 cents an ounce of pure alcohol for distilled spirits, 10 cents for beer, and 8 cents for wine. If this excise tax was raised to 25 cents for all three categories, starting Jan. 1, 1994, Washington would reap an extra $3.7 billion in fiscal 1994 above the fiscal 1992 level of around $8 billion and an extra $4.7 billion above the 1992 level in fiscal 1995 and each year thereafter, according to calculations of the Congressional Budget Office. A doub ling of the excise tax on tobacco would raise about $4 billion more.
Because tobacco users have become a minority in the US, it has become easier for politicians to restrain its use through taxes or other actions. Liquor has a broader constituency, however.