“Schools, city stare into abyss” screams a headline in the San Diego Union-Tribune about the hundreds of millions of dollars in budget shortfalls foreseen in the next few years. “Schwarzenegger declares California fiscal emergency” yells Reuters. But the Golden State, with its $19 billion deficit, isn’t the only one with a problem. New York faces an $8.5 billion deficit, Michigan $2 billion – 46 states had budget deficits in FY 2010-2011. Another $120 billion in state budget deficits are forecast for 2012.
There’s a pretty simple way to close at least part of those gaps and, at the same time, reduce our country’s worst youth drug problem: raise alcohol taxes.
The public enthusiastically supports alcohol tax increases. But because the alcohol industry lobbies vigorously in state capitals, alcohol tax increases rarely succeed. (The alcohol industry routinely raises prices on its own, which belies lobbyists’ claims that alcohol tax increases – and therefore price increases — hurt business.) Though some states have enacted small alcohol tax increases, most attempts fail. In California this year, an alcohol tax proposal never made it out of committee – despite the state’s dire financial condition. It died in the Assembly Health Committee on a 5-8 vote with 6 members taking a walk, both Democrats and Republicans alike.
That’s the power of the alcohol lobby – convincing state lawmakers to breezily ignore the public will in the middle of a crisis. If only a power for the public good were so strong.
The legislation that the Assembly Health Committee killed this year was a mere 10-cent a drink tax increase that would have raised an estimated $1.4 billion a year. A 25-cent per drink tax increase would provide more than $3 billion a year for California.
Alcohol tax increases are a double winner, because they also deter dangerous drinking and particularly underage drinking, which kills more young people than all other drugs combined. Research on how tax increases reduce dangerous drinking is particularly deep. According to one report by the National Bureau of Economic Research:
“…If reductions in youth alcohol consumption, heavy alcohol consumption and alcohol-related injuries and deaths are desired, an increase in taxes on alcoholic beverages is an effective policy to accomplish these goals.”
Alcohol taxes are part of our nation’s history. The first alcohol tax was levied in 1791 to pay off Revolutionary War debt. In 1940, alcohol taxes made up 10 percent of federal revenues; today, that figure is 0.3 percent. Not surprising, then, that cheap beer and wine cost about the same as soda pop and milk.
Failure to raise alcohol taxes provides de facto tax breaks for foreign companies. That’s right – Budweiser, Miller, most spirits and even many American vineyards are owned by overseas companies, which pay for the army of lobbyists who ply the halls of our state capitals and convince state lawmakers to defeat alcohol taxes.