States and municipalities can add an excise tax or a sales tax to alcoholic beverages, increasing the price paid for such beverages. Alcohol excise taxes are usually based on the volume of beverage purchased while sales taxes charge a percentage of a product’s cost. The effects of excise taxes on price can erode over time due to inflation if taxes are not adjusted regularly; sales taxes increase with price changes so 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.
Expected Beneficial Outcomes (Rated)
Reduced excessive drinking
Reduced alcohol-related harms
Reduced underage drinking
Other Potential Beneficial Outcomes
Reduced incidence of STIs
Evidence of Effectiveness
There is strong evidence that increasing alcohol taxes reduces excessive alcohol consumption and related harms1, 3, 4. Alcohol consumption decreases when alcohol prices increase; effects have been shown for beer, wine, and spirits1, 3, 5, 6. 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 motor vehicle crashes and fatalities, alcohol-impaired driving1, 4, 7, and mortality from liver cirrhosis1. Alcohol tax increases may also reduce violence1, 4 and reduce sexually transmitted infections (STIs)4, 8, 9, particularly among non-Hispanic blacks8. Public health effects are expected to be proportional to the size of the tax increase1.
Alcohol taxation and pricing policies appear to have a greater effect on alcohol consumption and alcohol-related deaths for individuals with low incomes than individuals with higher incomes10, youth than adults5, 10, and heavy drinkers than moderate drinkers5.
A 2004 Institute of Medicine report recommends placing top priority on beer taxes and indexing excise tax rates for all alcoholic beverages to the consumer price index so that they keep pace with inflation without further legislative action11.
Impact on Disparities
Alcohol tax rates vary by state and by type of alcohol. As of January 2017, state excise taxes ranged 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 beer12.
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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 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.
5 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.
6 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.
7 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.
8 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.
9 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.
10 Meier 2016 - Meier PS, Holmes J, Angus C, Ally AK, Meng Y, Brennan A. Estimated effects of different alcohol taxation and price policies on health inequalities: A mathematical modelling study. PLoS Medicine. 2016;13(2):1-27.
11 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, DC: National Academies Press; 2004.
12 TPC-Alcohol tax 2017 - Alcohol Rates 2000-2010, 2013-2017. Washington, DC: Urban-Brookings Tax Policy Center (TPC); 2017.
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