Alcohol consumption and Tax Differentials Between Beer, Wine and Spirits

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Henry Saffer (1989)
  • Subject:
    mesheuropmc: food and beverages | education | health care economics and organizations

Several public health interest groups in the United States have recently called for equalization of the federal tax on a unit of alcohol in beer, in wine and in spirits. This paper provides some new empirical evidence of what effect alcohol tax differentials have on total alcohol consumption. The data indicate that the greatest decrease in alcohol consumption results from an increase in spirits taxes, followed by beer taxes and then wine taxes. This suggests that the existing generally accepted taxation policy of placing the highest tax on spirits, a lower tax on beer, and the lowest tax on wine, results in the greatest reduction in total alcohol consumption.
  • References (3)

    Cook P. and Tauchen G., "The Effect of Liquor Taxes on Heavy Drinking", The Bell Journal of Economics, vol. 13, no. 2, Autumn 1982.

    Johnston J., Econometric Methods, third ed., McGraw-Hill Book Company: New York, 1984.

    Maddala, G.S. Limited Dependent and qualitative Variables in Econometrics. Cambridge, England: Cambridge University Press, 1983.

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