Alcohol taxes
States and municipalities can add an excise tax or a sales tax to alcoholic beverages, increasing the purchase price. Alcohol excise taxes are usually based on the beverage volume while sales taxes charge a percentage of a product’s cost. The effects of excise taxes can erode over time due to inflation if taxes are not adjusted regularly; sales taxes increase with price changes and are not affected by inflation. Sales and excise taxes can be implemented simultaneously or separately. Tax amounts often differ for beer, wine, and liquor1, 2.
What could this strategy improve?
Expected Benefits
Our evidence rating is based on the likelihood of achieving these outcomes:
Reduced excessive drinking
Reduced alcohol-related harms
Potential Benefits
Our evidence rating is not based on these outcomes, but these benefits may also be possible:
Reduced underage drinking
Reduced violence
Reduced incidence of STIs
What does the research say about effectiveness?
There is strong evidence that increasing alcohol taxes reduces excessive alcohol consumption1, 3, 4 and alcohol-related harms1, 5, 6. Alcohol consumption decreases when alcohol prices increase; effects have been shown for beer, wine, and spirits1, 3, 4, 7, 8. Higher alcohol prices, often achieved through tax increases, are also associated with lower levels of drinking among high school and college-age youth1.
Higher alcohol prices reduce alcohol-related harms such as alcohol-related motor vehicle crashes. Injuries and fatalities1, 5, 6, 9, and mortality from liver cirrhosis1. Lower state beer taxes are associated with higher prevalence of alcoholic liver disease across all age groups, and in particular middle-aged individuals with low socioeconomic status10. Alcohol tax increases may also reduce violence1, 6 and reduce sexually transmitted infections (STIs)6, 11, 12. In states with higher beer taxes, male adults are less likely to report being physically harmed by someone who had been drinking13. Furthermore, a study of beer excise taxes in five U.S. states finds tax increases are associated with reductions in firearm homicide rates in most cases14. A Maryland-based study suggests that state alcohol tax increases are less effective in preventing alcohol-related offenses among underage populations than for adults15.
Alcohol taxes are most effective at reducing the amount of alcohol consumed by people who are considered heavy drinkers4, 16. An analysis of potential alcohol tax increases suggests excessive drinkers would pay almost three quarters of the revenue generated by such increases, and those with higher incomes and who are white would pay higher per capita costs16.
Public health effects are expected to be proportional to the size of the tax increase1. Alcohol taxes have not substantially increased over the last several decades, resulting in an erosion in value due to inflation17, 18. Experts suggest future legislation index alcohol taxes to inflation17, 18 and prioritize beer taxes19. Furthermore, revenue generated from alcohol taxes typically help address the costs of alcohol overuse, however revenue currently only covers about a quarter of the costs20. Findings from an Illinois-based study suggest tax increases on spirits and wine led to an increase in beer sales. Policymakers may want to increase alcohol taxes on all alcohol types by the same percentage21.
How could this strategy advance health equity? This strategy is rated potential to decrease disparities: supported by some evidence.
There is some evidence that alcohol taxes have the potential to decrease disparities in alcohol consumption and alcohol-related harms by income level4, 23. However, it is unclear what impact alcohol taxes may have on racial and ethnic disparities.
People with low incomes may experience more health benefits from alcohol taxes since increased alcohol costs may lead to decreased alcohol consumption23. Additionally, alcohol consumers with lower incomes are more likely to experience alcohol-related harms than those with higher incomes23.
Alcohol taxes appear to change drinking behavior across racial and ethnic groups differently, with a greater impact on whites and the smallest impact among Hispanics24. The effects vary by the type of alcohol taxed. For example, higher beer taxes are associated with lower odds of any drinking among white women, and less beer consumed and lower odds of alcohol-related consequences among Black women. Higher spirits taxes are associated with less beer consumed by Hispanic men and women and less wine consumed by Hispanic women25. Experts suggest further research is needed to understand how to address efficiency and equity in implementation of alcohol taxes to close disparities in alcohol-related harms24. An Illinois-based study suggests that alcohol tax increases may reduce sexually transmitted infections, particularly among non-Hispanic Blacks11.
What is the relevant historical background?
Alcohol taxation in the U.S. began in 1791. Alcohol taxes were used at the end of Prohibition in 1933 to offset federal deficits during the Great Depression, and eventually helped fund spending associated with World War II and the Korean War. Additionally, alcohol taxes have been levied to benefit public health to reduce excessive drinking and help cover the costs of alcohol-related societal harms. Federal alcohol excise taxes were last increased in 1991, then reduced in 202026.
Non-Hispanic white adults (6.4%) were more likely than non-Hispanic Black (2.9%), Hispanic (2.6%), and non-Hispanic Asian (2.0%) adults to engage in heavy drinking27. However, alcohol consumers who are Black or Hispanic appear more likely to experience alcohol-related injuries, accidents, and health and social consequences than consumers who are white. Additionally, Black and Hispanic male consumers may be more likely to experience alcohol dependence symptoms. These racial and ethnic disparities are seen across all levels of consumption and may be most pronounced at low levels of consumption, suggesting there are environmental and cultural factors that play28, 29. Evidence suggests that the combined effects of drinking cultures, historically rooted patterns of racial discrimination and persistent socioeconomic disadvantage in racialized groups contribute to these disparities30. Another factor is the density of off-premise alcohol outlets is higher in low-income and racialized communities. This is further intensified by targeted marketing toward Black communities for alcohol, which may be related to the finding that alcohol pricing effects on purchasing have declining sensitivity as residential concentrations of Blacks increased25.
Equity Considerations
- Is there an alcohol tax in your community? If not, does your state preempt you from having a local alcohol tax?
- Is the alcohol tax implemented in your community effective in reducing the purchase and consumption of alcohol? How does it need to be altered to be effective?
- What other interventions, such as alcohol outlet density restrictions, could be paired with the alcohol tax to support positive change?
- Are you seeing substitution effects in your community? Is substitution higher amongst certain population groups (e.g., consumers with low incomes)? What steps can be taken, or interventions implemented, to reduce the potential for a substitution effect?
Implementation Examples
Alcohol tax rates vary by state and by type of alcohol. As of February 2023, state excise taxes range from $1.50 (MD, DC) to $14.27 (WA) per gallon of spirits, $0.20 (CA) to $2.50 (AK) per gallon of wine, and $0.02 (WY) to $1.29 (TN) per gallon of beer. Most states also levy sales taxes on spirits, wine, and beer22.
Implementation Resources
‡ Resources with a focus on equity.
APIS - Alcohol Policy Information System (APIS). Welcome to the Alcohol Policy Information System.
TPC-Alcohol tax 2023 - State alcohol excise taxes on wine, beer, and spirits, 1982-2023. Washington, D.C.: Urban-Brookings Tax Policy Center (TPC); 2023.
Footnotes
* Journal subscription may be required for access.
1 CG-Alcohol - The Guide to Community Preventive Services (The Community Guide). Excessive alcohol consumption.
2 Mosher 2017 - Mosher JF, Adler SS, Pamukcu AM, Treffers RD. Review of state laws restricting local authority to impose alcohol taxes in the United States. Journal of Studies on Alcohol and Drugs. 2017;78(2):241-248.
3 Wagenaar 2009 - 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. 2009;104(2):179-90.
4 NBER-Saffer 2022 - Saffer H, Gehrsitz M, Grossman M. The effects of alcohol excise tax increases by drinking level and by income level. National Bureau of Economic Research (NBER). 2022: Working Paper 30097.
5 Lavoie 2017 - Lavoie MC, Langenberg P, Villaveces A, et al. Effect of Maryland’s 2011 alcohol sales tax increase on alcohol-positive driving. American Journal of Preventive Medicine. 2017;53(1):17-24.
6 Wagenaar 2010 - Wagenaar AC, Tobler AL, Komro KA. Effects of alcohol tax and price policies on morbidity and mortality: A systematic review. American Journal of Public Health. 2010;100(11):2270-8.
7 Giesbrecht 2016 - Giesbrecht N, Wettlaufer A, Cukier S, Geddie G, Gonçalves A-H, Reisdorfer E. Do alcohol pricing and availability policies have differential effects on sub-populations? A commentary. International Journal of Alcohol and Drug Research. 2016;5(3):89-99.
8 Esser 2016 - Esser MB, Waters H, Smart M, Jernigan DH. Impact of Maryland’s 2011 alcohol sales tax increase on alcoholic beverage sales. The American Journal of Drug and Alcohol Abuse. 2016;42(4):404-411.
9 Wagenaar 2015 - Wagenaar AC, Livingston MD, Staras SS. Effects of a 2009 Illinois alcohol tax increase on fatal motor vehicle crashes. American Journal of Public Health. 2015;105(9):1880-1885.
10 Aslam 2021 - Aslam S, Buggs J, Melo S, et al. The association between alcoholic liver disease and alcohol tax. American Surgeon. 2021;87(1):92-96.
11 Staras 2014 - Staras SAS, Livingston MD, Christou AM, Jernigan DH, Wagenaar AC. Heterogeneous population effects of an alcohol excise tax increase on sexually transmitted infections morbidity. Addiction. 2014;109(6):904-912.
12 Staras 2016 - Staras SAS, Livingston MD, Wagenaar AC. Maryland alcohol sales tax and sexually transmitted infections: A natural experiment. American Journal of Preventive Medicine. 2016;50(3):e73-e80.
13 Trangenstein 2020 - Trangenstein PJ, Subbaraman MS, Greenfield TK, et al. Association between state-level alcohol availability and taxation policies on the prevalence of alcohol-related harms to persons other than the drinker in the USA, 2000–2015. Drug and Alcohol Review. 2020;39(3):255-266.
14 Tessler 2019 - Tessler RA, Mooney SJ, Quistberg DA, et al. State-level beer excise tax and firearm homicide in adolescents and young adults. American Journal of Preventive Medicine. 2019;56(5):708-715.
15 Smart 2018 - Smart MJ, Yearwood SS, Hwang S, Thorpe RJ, Furr-Holden CD. Impact of alcohol tax increase on Maryland college students’ alcohol-related outcomes. Substance Use and Misuse. 2018;53(6):1015-1020.
16 Naimi 2016 - Naimi TS, Daley JI, Xuan Z, et al. Who would pay for state alcohol tax increases in the United States? Preventing Chronic Disease. 2016;13:150450.
17 Blanchette 2020 - Blanchette JG, Ross CS, Naimi TS. The rise and fall of alcohol excise taxes in U.S. states, 1933–2018. Journal of Studies on Alcohol and Drugs. 2020;81(3):331-338.
18 Naimi 2018 - Naimi TS, Blanchette JG, Xuan Z, Chaloupka FJ. Erosion of state alcohol excise taxes in the United States. Journal of Studies on Alcohol and Drugs. 2018;79(1):43-48.
19 IOM-Underage drinking 2004 - Institute of Medicine (IOM), National Research Council (NRC), Committee on Developing a Strategy to Reduce and Prevent Underage Drinking, Board on Children, Youth, and Families (BCYF). Reducing underage drinking: A collective responsibility. (Bonnie RJ, O’Connell ME, eds.). Washington, D.C.: National Academies Press; 2004.
20 Blanchette 2019 - Blanchette JG, Chaloupka FJ, Naimi TS. The composition and magnitude of alcohol taxes in states: Do they cover alcohol-related costs? Journal of Studies on Alcohol and Drugs. 2019;80(4):408-414.
21 Gehrsitz 2021 - Gehrsitz M, Saffer H, Grossman M. The effect of changes in alcohol tax differentials on alcohol consumption. Journal of Public Economics. 2021;204:104520.
22 TPC-Alcohol tax 2023 - State alcohol excise taxes on wine, beer, and spirits, 1982-2023. Washington, D.C.: Urban-Brookings Tax Policy Center (TPC); 2023.
23 Meier 2016 - Meier PS, Holmes J, Angus C, et al. Estimated effects of different alcohol taxation and price policies on health inequalities: A mathematical modelling study. PLoS Medicine. 2016;13(2):1-27.
24 An 2011 - An R, Sturm R. Does the response to alcohol taxes differ across racial/ethnic groups? Some evidence from 1984-2009 behavioral risk factor surveillance system. Journal of Mental Health Policy and Economics. 2011;14(1):13-23.
25 Subbaraman 2020 - Subbaraman MS, Mulia N, Kerr WC, et al. Relationships between US state alcohol policies and alcohol outcomes: Differences by gender and race/ethnicity. Addiction. 2020;115(7):1285-1294.
26 CRS-Cilluffo 2021 - Cilluffo AA. Federal excise taxes: Background and general analysis. Congressional Research Service (CRS) R46938; 2021.
27 CDC-Heavy Drinking 2018 - Boersma P, Villarroel M and Vahratian A. Heavy drinking among U.S. adults, 2018. National Center for Health Statistics; 2020.
28 Delker 2016 - Delker E, Brown Q, Hasin DS. Alcohol consumption in demographic subpopulations: An epidemiologic overview. Alcohol Research: Current Reviews. 2016;38(1):7-15.
29 Witbrodt 2014 - Witbrodt J, Mulia N, Zemore SE, Kerr WC. Racial/ethnic disparities in alcohol-related problems: Differences by gender and level of heavy drinking. Alcoholism: Clinical and Experimental Research. 2014;38(6):1662-1670.
30 Vaeth 2017 - Vaeth PAC, Wang-Schweig M, Caetano R. Drinking, alcohol use disorder, and treatment access and utilization among U.S. racial/ethnic groups. Alcoholism: Clinical and Experimental Research. 2017;41(1):6-19.
Related What Works for Health Strategies
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