Alcohol Taxes, Alcohol Prices and Alcohol Sales: Quasi-Natural Experiments

Project Outcomes Statement

This research project investigates the effects of higher alcohol prices induced by increases in alcohol excise taxes. We found that a $1.00 increase in alcohol excise taxes increased alcohol prices by up to $1.50. We found that consumers react by switching to less expensive products and increase purchases of low-tax alcoholic beverages. Certain consumers are able to offset at least some of the higher costs associated with a tax increase. This study shows that differences in the tax increase on spirits, on wine and on beer can impact both public health and tax revenue. The results from this project also show that heavy drinkers are responsive to high alcohol taxes. Thus, the alcohol industry claim that alcohol taxes do not reduce consumption by heavy drinkers is not supported. We conclude that, when spirits taxes increase more than wine taxes, the industry claim
that low income drinkers are disproportionally hurt by alcohol taxes is supported by the results.