Taxing Beer to Pay Doctors

USA Today reports on a proposal circulating in the Senate Finance Committee to fund health care through sin taxes on booze.

Beer taxes would go up by 48 cents a six-pack, wine taxes would rise by 49 cents per bottle, and the tax on hard liquor would increase by 40 cents per fifth. Proceeds from the new taxes would help cover an estimated 50 million uninsured Americans.

Matt Yglesias finds this proposal “pretty attractive,” even while acknowledging that the direct public health benefits from reduced alcohol consumption would be minimal.   He notes that this would be a “return to the level of taxation that existed a few decades ago” so it “would not be an unprecedented burden on the American consumer.”

That’s probably right, although it strikes me as highly regressive.  A flat rate based on the category of beverage is especially bizarre.  Why should someone buying a bottle of “Two Buck Chuck” pay the same tax as someone buying a $50 bottle of pinot noir?  Matt suggests that we should instead charge based on alcohol content, which would make sense if the aim was mostly to deter excessive drinking.  But, since we’re trying to fund a health care system, it would make more sense to tax based on price.

Matt asserts “universal health care is highly desirable and has to be paid for somehow.”  I agree with the former, if by “universal health care” we mean that all Americans can afford to get treatment when they’re sick or injured, and the latter necessarily follows.   It’s not at all clear, though, why the “somehow” ought to apply to those of us who use a legal, harmless-if-used-responsibly product.

Matt counters that “the incidence would fall overwhelmingly on a relatively small number of problem drinkers (rather than the broad mass of people who drink moderately on social occasions)” but that’s simply not true.  Sure, a “problem drinker” is likely to consume more booze than a “social drinker.”  But the latter vastly overwhelm the former in number and all of us would pay the tax.

[UPDATE:  In a subsequent post, Matt points to Igor Volsky‘s recitation of junk science haven Center for Science in the Public Interest data showing that moderate drinkers would pay almost no taxes — and 35 percent would pay nothing at all! — whilst the top 5% would pay $215 a year.   I have no data to offer in rebuttal but personal observation makes me exceedingly skeptical of the distribution.]

Given that we’re likely going to have some sort of taxpayer-funded health program passed during Obama’s run, why not simply impose a consumption tax, perhaps excluding food and medicine, instead? It would be less regressive and wouldn’t single out a single activity for punitive treatment.

Photo by Flickr user zsenya under Creative Commons license.

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James Joyner
About James Joyner
James Joyner is a Security Studies professor at Marine Corps University's Command and Staff College and a nonresident senior fellow at the Scowcroft Center for Strategy and Security at the Atlantic Council. He's a former Army officer and Desert Storm vet. Views expressed here are his own. Follow James on Twitter @DrJJoyner.

Comments

  1. floyd says:

    Of course this Tax increase would only be charged to those drinkers making over $250,000 per year!
    95% of taxpayers will get a discount. Right??

  2. Dave Schuler says:

    Why not a national sales tax rather than increasing the excise AKA “sin tax” on alcoholic beverages? The evidence suggests that the current economic downturn is a consequence of excessive dependence on retail sales. That suggests that, unless you believe that the financial crisis was caused by too much beer, retail sales, generally, is a bigger problem than too much Miller Genuine Draft.

  3. PD Shaw says:

    Reminds me I need to fire back up the homebrew equipment one of these days.

  4. Dave Schuler says:

    Reminds me I need to fire back up the homebrew equipment one of these days.

    Funny you should mention that, PD. I’ve got one batch aging right now, another I should bottle soon, and it’s probably time to get another started up right quick.

  5. Zelsdorf Ragshaft III says:

    What if the various states decided those who manufactured or produced the product within their state were not subject to federal tax? Filed suit in federal court disputing the authority of the federal government to tax intrastate commerce. Someone needs to stop the federal government from runaway spending. One way to do it is to limit federal income.

  6. odograph says:

    Is beer technically booze? I thought that word was reserved for distilled products. I also think that beer, specifically, has been more closely grouped with food, in western traditions.

    Martin Luther writes warmly of beer.

    That said, I think we’ve all seen beery abuse. There is a social cost associated, even if not specifically caused, by beer. A light tax seems justified on that basis.

  7. sam says:

    Reminds me I need to fire back up the homebrew equipment one of these days.

    Yeah, and I’ll have to look into winemaking (I think you can still make up to 200 gals per year for personal use. Might not be enough, but…). You know, I got thrown out of the wine tasting competition once.

    Host of competition: Let us begin with this red. Sips, swishes, spits out: Ah, a subtle blend of merlot and cab; soft on the palette, nice finish. Strawberrys, plums, cherries, slight almond.

    1st wine snob: Um. I’d have to disagree with the plums. Apricots. Not really finding the almond, either.

    2d wine snob: Oh, no, no. Definitely no strawberries. Plums, perhaps. Cherries and, yes, I do find the almond.

    3d wine snob: Apricots? Not at all. Strawberries, plums, cherries, pears, walnuts.

    sam: Jeez guys, I dunno. Grapes, grapes, grapes, grapes.

  8. odograph says:

    BTW, on “social” vs. “problem” drinkers … there was a study done a little while back. It was by a Czech ornithologist if I recall correctly. The query was to study the correlation between beer drinking and rate of publication amongst Czech scientists. The interesting outcome was that productivity very rapidly fell off with even small amounts of beer consumption. Tea totalers were vastly more productive.

    Ah, here’s one review, from a bunch of beer drinkers:

    http://www.brookstonbeerbulletin.com/beer-and-scientific-publishing/

    I’m not saying we should tax our way to productivity .. but it’s interesting.

  9. sam says:

    The interesting outcome was that productivity very rapidly fell off with even small amounts of beer consumption. Tea totalers were vastly more productive.

    Mailer had an interesting take on drinking and writing: “You know,” he said, “you get completely shitfaced and wattle up to the secret of the universe, only to find you’ve lost your vocabulary.”

  10. Dave Schuler says:

    How small is small, odograph? There’s already a roughly 7% federal excise tax on beer and I believe every state imposes an excise tax of its own. Here’s a survey of excise taxes for you.

    Wisconsin and Missouri, understandably, have low $.06 per gallon excise taxes.

    Note, however, the potentially unexpected secondary effect that would result from raising the federal excise tax: if it has any deterrent effect whatever it would reduce state excise tax revenues.

  11. odograph says:

    A premium 6’er is running 6-9 bucks out here in California, depending on whether you look for a Trader Joe’s deal, or just pay the freight at a supermarket.

    I guess my “behavioral” response is that beer is already expensive, and a quarter doesn’t matter. For my occasional consumption it’s not a big deal. I’m not ready to haul out my brew equipment (a strange correlation here at OTB).

    Do you suppose that ethanol fuel policy has more to do with why beer prices leaped than tax?

  12. JKB says:

    The evidence suggests that the current economic downturn is a consequence of excessive dependence on retail sales. That suggests that, unless you believe that the financial crisis was caused by too much beer, retail sales, generally, is a bigger problem than too much Miller Genuine Draft.

    That makes no sense at all. Where I live, by law, I can only purchase beer at retail. Which would imply that purchase is part of the retail sales. I suppose there could be an assumption that with the tax increase, I would forgo the purchase of beer instead spend the money on something not “sinful”. Thus supporting the “politically correct” retail sales instead of the bad retail sales. This, of course, would mean the booze tax to fund healthcare would not achieve its stated goals since all right thinking people would shift their purchases to something less sinful and therefore not subject to the tax.

    The regressive nature of this tax is vicious. The wealthy, who logic dictates would drink the more expensive sinful products, would pay significantly less as a percentage of purchase price compared to the other 95% who are trying to get by on their MGD. Let’s see, 49 cents added to the price of a $100 bottle of wine is a 0.2% tax vs 48 cents added to the price of a $6 six-pack of beer is an 8% tax. Oh and guess who is going to lose their job at the winery, distiller and brewery. Hint, it isn’t going to be the guy buying $100 wine.

  13. Dave Schuler says:

    I doubt that ethanol policy has much to do with beer price changes since I doubt that the ingredients make up that much of the cost. The price change graphs I’ve seen look like the price of beer varies with the price of oil.

  14. PD Shaw says:

    There has been a worldwide shortage of hops the last few years from disease, bad weather in Europe and warehouse fires. The price of highly-hopped beer has gone up a lot.

  15. PD Shaw says:

    I’ll quibble with the notion of booze as sin. Unlike tobacco and gambling, alcohol has medical benefits that go beyond just their enjoyment. Its arguably healthier to drink moderately than not at all.

    It’s also odd that just after an election where major candidates drank alcohol for the camera to show that they understood “Joe Six Pack,” the politicians want to stick it to Joe. I wonder why Joe doesn’t trust Washington?

  16. But, but, isn’t moderate consumption of alcohol supposed to provide substantial health benefits? Now they want us to be less healthy while they lower health care costs? Or do they believe that people will not modify their behaviors regardless of any tax increase? And if so, then why so much social engineering using the tax code?
    Dman, this is so confusing.

  17. Drew says:

    sam –

    At the risk of being called a wine snob…..

    Red fruit flavors would be rare indeed in Cabernets. They are all about blue fruits, especially cassis and plum. Merlots can have hints of cherry or rasberry. I’ve never heard of (or tasted) strawberries. Could happen, I guess.

    Apricots? In a red? I must say I’ve never heard of that. Apricot is a hallmark taste in Sauternes.

  18. odograph says:

    Charles … tell the Liberals that they should give out free wine/beer until it reaches the optimal health threshold, and THEN tax the excess 😉

    (Actually that is very like Martin Luther’s day.)

  19. sam says:

    @Drew

    sam –

    At the risk of being called a wine snob…..

    Well, I was thrown out….:)

  20. Grewgills says:

    Funny you should mention that, PD. I’ve got one batch aging right now, another I should bottle soon, and it’s probably time to get another started up right quick.

    We just finished the kegerator a little while back and are planning on brewing a Belgian style Wit in the next week or two to start the summer. After that we were looking to make an Amber, do you have any good recipes?

  21. sam says:

    BTW, for the wine aficionados, there was indy movie a few years ago called Bottle Shock, that is a fictionalized account of the besting of French wines by California wines in an official competition in France in the 70s. It’s a nice little movie. Stars Alan Rickman, Bill Pullman, and Dennis Farina. Farina’s character tells Rickman’s character (who brought the wines from California for the competition), “You know what this means, there’s going to be worldwide wine production now.” And, lo. Rickman has a funny line. Pullman, the American vintner says, when Rickman first shows at his winery and makes his pitch, “Why do I think you’re a pompous ass?”
    Rickman: “Well, I’m British.”

  22. Drew says:

    I have to weigh in here.

    The notion of a geographical region “besting” another is just wrong. Regions have styles, based upon weather, terrior and winemakers preferences; but its not necessarily that one region is inherently “better.”

    So for example, the left bank (Cab) Bordeaux wines, especially from Pauillac and St. Julien, with their classic austere and narrow blue fruit wrapped around smokey tannins style appeals to many (like me) but is not necessarily “better” than a more fruity cab from California.

    Or to go the other way, a lush California merlot is not necessarily “better” than the more earthy right bank merlots from St. Emilion. (Although “fruit bomb” merlot based wines are all the rage in “garage” wineries over there now.)

    There are fine wines from everywhere, and no “best” region. Although Australian wines suck.

    Sorry, couldn’t help myself…..

  23. sam says:

    You can’t see it, but there’s a white flag waving above this line.

  24. James Joyner says:

    Although Australian wines suck.

    Heh. Actually, I’ve had some very nice Malbecs from Australia.

  25. Drew says:

    James and Sam –

    See, there you go. To each his own preference.
    Although the Malbec’s I’ve tried and liked were all from Argentinia. In fact, I didn’t even know Australia was having a go of it with that grape.

  26. Dave Schuler says:

    Australia, Argentina. What’s the difference?

  27. Drew says:

    DAVE –

    Crazy as it sounds, in Bordeaux the same type of grapes grown just a thousand yards from each other yield different wines. Terrior.

  28. Dave Schuler says:

    I know. I’m a Missourian and believe it or not that’s wine country. Until Prohibition Missouri produced more wine than any state in the Union other than California. The area around Augusta, Missouri was America’s first appellation.