In the pre-Prohibition era, the saloons would advertise a “free lunch” for the working man. The catch was the expectation that the working man would have a beer with that lunch. The beer was definitely not free. Thus the most famous saying associated with economic science – “there’s no such thing as a free lunch” -- originates with alcohol retailing.
Given that historical reference, I enjoy the irony that alcohol taxation is a “free lunch,” or at least close to it. An increase in the federal alcohol tax could benefit most people directly (in the sense that they would come out ahead financially), while increasing economic efficiency for all.
Let me fill in the background on this not uncontroversial claim. While taxes usually impair economic efficiency by distorting incentives, that is not necessarily the case. If there are negative externalities associated with a particular activity, then it is “underpriced” and will lead to over-indulgence. Compelling examples include carbon emission and driving during rush hour.
Needless to say, drinking, while a pleasurable activity to many (including me), generates negative externalities. If you add up the deleterious effects on crime and highway safety and STD transmission and the quality of parenting, it is easy to surpass a dollar per drink on average. The public is inadvertently forced to share that cost, only a small part of which is covered by alcohol tax revenues. (The current federal excise tax amounts to 5 cents per beer, and even the highest state tax rates are lower.)
It would be more efficient if drinkers were confronted with the full price of their decision of how much to consume. Raising the tax rate can help accomplish that purpose. And it would be fairer to have the drinkers pay the social costs (in proportion to their drinking), rather than have those costs borne willy-nilly in everyone’s insurance premiums, income tax rates, uncompensated risks, and so forth.
However, while it the “drinker pays” approach seems fairer than the current system and certainly more efficient, it is far from perfect. The problem is that that average social cost conceals a great deal of variation.
A drinker who enjoys one glass of wine or beer with dinner every night is unlikely to impose any cost on others as a result. If that same person drank all her weekly ration on Saturday night before driving home, the total tax bill would be the same, but the social-cost calculus would be far different. The public consequences of private drinking choices depend on who, when, and where, not just how much.
Thus the alcohol tax appears to be a crude remedy at best.
Instead of taxing alcohol, it seems that it would be preferable to “tax” the socially costly consequences of abuse directly: Impose still heftier penalties on drivers convicted of driving while intoxicated. Have social workers finger negligent and abusive parents for sanctions. Step up enforcement against alcohol-related violent crime (and maybe those drunks who put themselves at foolish risk of being victimized). Subsidize condom distribution. And so forth.
Of course these remedies, while seemingly better targeted, are costly in terms of use of public authority and revenues. So let’s look again at whether alcohol taxes are really all that “crude.” It is relevant and revealing to look at the distribution of alcohol consumption.
Per capita consumption in the United States runs about 500 drinks per year, where a “drink” is a 12-ounce beer, a 5-ounce glass of wine, or a 1.5 ounce shot of 80-proof spirits (all of which have about the same amount of ethanol) But that average also conceals a great deal of variation: about 35 % of adults abstain, and drinking is very concentrated within the larger group who do drink.
The famous 20-80 rule of marketing applies – 20% of the consumers of most any commodity account for 80% of the total purchased. Removing the abstainers, that means that 13% of adults consume 80% of the ethanol, and thus pay 80% of the tax. (I’ve checked this estimate against actual self-reported drinking, and it works pretty well.)
What’s more, only about 7% of adults drink more than that 500-drink per capita average. That means that 93% of the American public contribute less than average to the alcohol tax.
As a thought experiment, consider increasing the alcohol tax by 10 cents per drink and then distributing the proceeds annually to every adult, $50 each. All but 7% would come out ahead on this deal. Given the preventive effect of higher alcohol prices, even that group would benefit from lower auto insurance rates and in other ways.
This thought experiment reminds us of the nice feature of alcohol taxes – unlike other prevention measures, this one generates revenue. And taxes no longer seem quite so crude or unfair, being nicely concentrated on the heaviest drinkers where we also find most of the abuse and social costs.
Of course in practice the distributional consequences of an alcohol-tax increase depend on how the money will be used. This year the extra revenues from any tax increase will be put to closing state budget deficits, which is to say that they will take the place of an increase in some other tax rate or a cut in expenditure. The ultimate question when it comes to distributional and efficiency consequences is how the alcohol tax stacks up against the alternatives.
The discussion of distributional consequences also must include mention of jobs. The alcohol industry has fought against nominal tax increases with great success on this basis. Not content to see tax rates erode with inflation, they are campaigning to have Congress roll back the 1991 increases, arguing that alcohol taxes reduce national employment. Of course this claim is not to be taken seriously.
The excise tax rate affects the size of the alcohol industry (and ancillary industries, such as funeral homes and trauma surgery). But aggregate employment is not affected by the beer tax, only the portion of the economy devoted to beer.
I’m sure at this point you are eager to hear just how high I would go when it comes to alcohol taxes in an ideal scenario. One standard would be to return the tax to the level that prevailed in some previous period, such as 1951 or 1975 – whenever the “good old days” occurred in your life or mine. I think that historical standard is an interesting reminder of trends, but provides little real guidance.
Another possibility is the public health standard, namely to save as many lives as possible. The problem is this -- The higher the tax, the more lives are saved, up to some level so high that we are back to Prohibition. The public health standard takes no account of the pleasures of drinking, and thus provides no basis for balancing pleasure against cost.
The most defensible approach in my mind is to set the tax equal to the average marginal social cost of a drink, perhaps with some distinctions between beer and spirits, or between on-premise and off-premise service. Estimating the precise levels would require careful up-to-date analysis. But we don’t have to do that precise analysis to know for sure that the social costs are much higher than the current tax rates. In particular, the increases that are being proposed by various governors this year are just a small step in the right direction, far less than the full social costs.
Any complete account of the public interest in alcohol taxation must deal with a few other issues – with the alleged health benefits of drinking (which I’ll turn to in a subsequent blog), and with possible substitutions. Would higher taxes lead consumers to substitute illicit drugs or dangerous moonshine?
The concern about an upsurge of moonshining or home manufacture in the face of higher prices is misplaced. Even if the 1950s, when federal taxes were a multiple of what they are today, illicit production filled only a miniscule piece of the market.
Some folks may try their hand at home beer- or wine-making, but unless it’s an enjoyable hobby it would not be a productive use of your time even if commercial prices increased by 50%.
The possibility of substitution to other intoxicants is a real one, but the evidence again points the other way. As it turns out, drinking and illicit drug use are not alternatives -- rather they tend to go together. Almost every illicit drug user also drinks, and a high percentage of those who seek treatment for drug abuse also have problems with alcohol. One analysis of alcohol tax changes found that marijuana smoking declined with higher alcohol taxes – the two intoxicants are complementary.
In any event, the evidence on the virtuous effects of tax increases that I cited in my previous blog is based on data analysis of what happens in states that raise their tax in comparison with states that don’t. The effects on mortality and all the other outcomes incorporate and reflect all the substitutions that consumers make in response to those higher alcohol prices.
If you were in a European country, or even Canada, your proposals wouldn't be out of line. Here, they are.
Bob
Do you have cites handy for those stats on the distribution of alcohol consumption?
I'm particularly interested in the claim that only 7% of adults drink more than the mean, and in what the shape of that curve looks like. That's a huge skew, and it carries profound implications for the rest of your argument, so I'd really like to know more about it.
The mission creep and "it's never enough" attitude of MADD and spineless legislators who can always add more and more penalties and fines and jail and restrictions on all of our freedom because it's politically expedient to do so is very destructive.
I also say this as an absolute teetotaler who's never had a drink in his life.
The risk is that someone in government will somehow be convinced and do what he wants. This wouldn't be everyone, of course, but enough may decide to go along that real harm would come from it.
Therefore, I propose a per word tax on him, increasing if he wants to write more than one word per day.
True, I am sure there are many days where he has emitted 5 or even ten words without harming society, but the risk and overall harm is simply too great to allow him untaxed freedom.
It'd make for a pretty interesting study, but there is a small but not unrealistic chance that, at a certain level, that sin tax would intensify the externality.
Says you.
This analysis fails to take into account the social capital created by shared drinking. Drinkers earn 10-14% more per capita than teetotallers, because they are better able to bond with their coworkers. The social bonds and friendships created make work more pleasant and efficient. Since people are able to share the social capital that others create, it is likely these teetotallers are getting something of a "free ride" off the bonds their drinking colleagues are creating. Thus, drinking likely contributes in excess of 14% to productivity.
Similarly, the US was created largely by thinkers in taverns; it is to their drinking that we owe our liberty today.
On these grounds, it seems clear that we should not only eliminate alcohol taxes, but offer government subsidies for alcohol: perhaps it could pay 14% of the cost of one's first drink on any evening? Not only would it be fair: it would benefit 73% of the population.
I stopped reading after this point.
2. I also share the other commenters' concern about the poorly quantified societal benefits of drinking. I am glad to hear Mr. Cook will address the supposed health benefits of moderate drinking, but the issue of "social capital" also needs looking at.
3. If I read this post correctly, the support for higher alcohol taxes is predicated entirely on the lopsided distribution of alcohol consumption per capita in the US. What's to guarantee that this distribution stays constant? What is this distribution like in other countries? How has our own distribution varied historically? What if our alcohol consumption distribution becomes more like France's? Would it be time to lower the tax? What if it became more like Japan's? Same story?
I hope that we can hear some kind of response from Mr. Cook on these topics before his guest-blogging concludes. He's writing about an important issue that gets little play in our public discourse, and I think some responses to our comments would not only increase the sophistication of our understanding of the issues here, but would also help us all keep the topic near the forefront of our minds.
I see no reason not to do so. In fact, given the massive death toll stemming from heart disease in particular, I think we should strongly consider taxing all food, and possibly even consider a progressive tax. Progressive is good, right? So if you buy a thousand calories worth of food, you get taxed a bit. Buy two thousand, you get taxed much more. Buy three thousand - which is more calories than many people need to live each day by half - and the tax should at least equal, if not exceed, the cost of whatever food you are purchasing.
Can you give me a principled reason why we should not adopt such a tax, or do you think we ought to consider it. Y'know, once we've used high taxes to stop people from drinking alcohol.
These two paragraphs highlight Mr. Cook's habit of taking a number pulled from somewhere, mixing it with some rule of thumb (as he declares it), and then basing his whole argument on the product. Setting aside whether the 500 figure is true, using the 20-80 "rule" is worthless. Even if the 20-80 rule applies to alcohol, everywhere and everytime, it is used here mistakenly. The 20-80 rule would have to be applied to all consumption because the abstainers are already in the per capita number. Basically, Mr. Cook is subtracting abstainers twice to arrive at his 7%.
But let's go with it. You wouldn't take the abstainers out of the 20% that drink the most alcohol would you? You would take them out of the 80% that drink 20% of the alcohol. But there is no reason to take them out, since per capita has already counted them. This is why applying the 20-80 "rule" to the per capita number is an error.
And if a few sheep persist, they are to be punished? How?
Assuming for a moment that this is correct, does it matter that demand is less elastic for alcoholics than for the social drinker? There's certainly some elasticity in the alcoholic's demand curve.
And, earlier in the post: "If you add up the deleterious effects on crime and highway safety and STD transmission and the quality of parenting, it is easy to surpass a dollar per drink on average."
But then at the end: "Some folks may try their hand at home beer- or wine-making, but unless it’s an enjoyable hobby it would not be a productive use of your time even if commercial prices increased by 50%."
If the marginal social costs are over a dollar a drink, commercial prices would increase by a lot more than 50% for low-end beverages -- they'll double or triple. A 30-pack of cheap beer will be $50 instead of $20. A bottle of "two-buck Chuck" will become "seven-buck Chuck."
Step up enforcement against crime victims?
Prof. Cook, you are off the rails. Seek professional help.
Perhaps we need to tax those who wish to impose nanny state regulations on us. Those who are public about it are in the minority, so if we put a big enough tax on them, it will be a net financial benefit for those of us who don't want to go around running other people's lives.
There are also negative externalities in Mr. Cook's wanting to nanny-state us: I got a distinctly unpleasant taste in my mouth and a sense of general irritation when I read his post this morning, and I get the impression that a lot of other people did too, based on the comments.
What is someone who wants to control society like a dictator doing on this site? Just because he can convince 51% of voters to go along with him doesn't make it right.
MAY I BE EXEMPT FROM YOUR MASTER SCHEME? PLEASE?
But again, this appears to be just a ruse. Mr. Cook has no interest in using taxes to pay for the "damages" caused by drinking. If he did, he'd come up with an accounting of those damages and a specific bill to be paid in order to compute his taxes.
No, Mr. Cook simply wants to punish people for their choice.
DUI punishments *are* overboard. But I don't see the proposed tax as related. One targets abusers, the other targets everyone. One is draconian, the other is what's currently being done to tobacco users already.
As far as different tax rates for on- and off-premises consumption, drinkers may shift their consumption patterns in ways that create new and unanticpated ill effects. E.g. bar patrons, missing the social aspect, may gather at one another's homes, without significantly reducing DUI rates. Witness the increase in binge drinking and alcohol related deaths among college students when the universities adopted zero-alcohol policies. Students drank far to excess in private, in much shorter periods of time, before going to the social event, for a net increase in undesirable behavior and consequences.
No, he's not ignoring the fact. What he *is* saying... and you are working very hard to ignore... is that unless the tax is jacked up to really silly levels, your "two beers a day" person isn't going to see a huge difference in how much he pays in taxes.
In fact, voting for a democrat would have a larger effect on your pocketbook overall... and I don't see people on this blog screaming "MAY I BE EXEMPT FROM YOUR MASTER SCHEME?" when one gets elected.
That's an odd use of the word "directly". Adding the full social cost as a tax to each drink would be MORE direct than the above since.
Also, buckeye for President!
I was specifically responding to:
"it would be preferable to “tax” the socially costly consequences of abuse directly: Impose still heftier penalties on drivers convicted of driving while intoxicated."
Even heavier? Sure, I guess we could have roadside beheadings at traffic checkpoints. Not sure what the SC would have to say about that, but since they approve the random stops in the first place, I'm not sure what grounds they would have to have a little unconstitutionally excessive punishment to go along with their unconstitutional groundless stops...
The connection between binge drinking and pregnancy is well known, and rational people take into account the cost of caring for a child when they're at a bar. On the other hand, they don't take into account the value a child get from existing. This value is presumably very high. After all, the vast majority of people prefer to continue their lives once they exist.
In economic theory, we could devise a Pareto improvement over the current situation. Investors provide free alcohol to college students. In return, the students promise that their future offspring will pay X% of their salary to the investors. The college students benefits - they get free alcohol. The future offspring benefits - they get to be born in the United States, and enjoy all the benefits of US citizenship in return for a slightly lower salary. And the investors could make a huge profit.
Of course, that arrangement is currently illegal under the 13th Amendment. Furthermore it has other practical problems. But a tax-free alcohol is at least closer to the ideal situation.
That's related to one of the big problems with this scheme, of course.
Once you start counting "costs" which are tenuously connected to the original proposal and hard to measure, it's easy to be too selective and not count other similarly vague effects that may counteract them.
Step up enforcement against crime victims?
Sure. They raise everyone's insurance rates, don't you know. Drunks who go into bad parts of town and don't run away from robbers fast enough cost all of us. It's no different from penalizing people who don't have locks on their doors. They're more likely to get robbed.
Which isn't even a parody; that's basically what he's saying. And we do penalize people without locks on their doors. Of course, we do it by having the insurance company raise their rates or refuse to pay off because they didn't take measures to secure their property. We don't penalize them by having a "no lock on door tax". Generally any argument that hurting yourself raises costs for society because damage to yourself raises insurance rates for the rest of us should be looked at very skeptically--if the increase is significant, the insurance company should be considering it already.
I wonder if Philip is trolling. Penalizing crime victims does sound pretty outrageous, but if he is trolling, he's forgotten Poe's Law.
I'm 49, 6 feet tall and weigh 175 pounds, the same as I did in law school. When I go to Six Flags' Hurricane Harbor waterpark in the summer, I see all manner of bulging human flesh wedged into nylon swimsuits, with once cute tattoos grotesquely stretched into faded sofa-size murals. The flesh bakes in the summer sun, putting these fatties at risk for skin cancer, assuming they don't die from diabetes or heart disease first.
Thus I propose:
1. A tax on people with excessive body mass index.
2. A tax on swimsuits larger than size 10 (women) or 36 (men).
3. A tax on sun screen with an SPF factor below 25.
It's for the good of all, and I am not unserious, though I recognize my proposal may be not untroublesome for not a few people.
My alcoholic brother-in-law briefly had a sobering experience when he briefly worked for a company that did asphalt paving in Sacramento during the summer. He told me that at the end of the day, these guys he worked with would have contests to see who could put down a case of beer (24 cans) the fastest.
I fear that a lot of people here have no concept of how utterly out of the norm the most severe alcoholics can be.
Professor Cook has made the claim that states enacting higher alcohol tax rates have enjoyed declines in a number of the negative externalities. I don't find that particularly hard to believe. But it does suggest two different possibilities:
1. Because the most serious alcohol abusers consume som much of it, the tax increase is seriously impacting them.
2. The negative externalities of alcohol are associated not just with serious alcohol abusers, but with "moderate" drinkers as well.
I have an acquaintance here in Idaho who is clearly an alcoholic. He just destroyed his second marriage with an adulterous event while drunk. (He came very close to being charged with rape, but the barely legal age woman could not remember enough of what happened to construct a criminal case, so the police just reminded him that adultery is a criminal offense in Idaho.) By most measures, he would be considered a "moderate" drinker because he has so little income that he can't really afford to drink as much as he would like.
1. You have never driven during rush hour, or
2. You have way more free time than I do, and don't mind spending it that way, or
3. Your analysis only considers direct financial costs (i.e. you don't believe the American truism that "time is money".)
I'd argue the opposite: driving in rush hour--at least in the greater Seattle area--is seriously overpriced, due to our shameful neglect to keep our infrastructure up-to-date with demand, and I go to significant lengths to avoid doing so, and having to pay the enormous cost in my time.
False dichotomy. Order is the prerequisite of freedom. If armed bands are roaming the neighborhood, the vast majority of people are not free to walk about and enjoy the outdoors. Etc.
The problem with both of these is that they don't actually tax fat people, or those failing to protect themselves from the sun. Indeed, a tax on sun screen below SPF 25 would simply encourage people to not wear sun screen--aggravating the problem that you are seeking to fix.
It should be beyond dispute that excessive consumption of alcohol causes problems in and increases the costs borne by society. Therefore, why should not taxes on alcohol sales be levied both to (a) attempt to reduce the propensity to drink too much by increasing the cost of drinking and (b) shift at least some of the societal costs to the drinkers. That doesn't mean that the tax would in fact be effective or that there might not be better ways to address the same problem (although an excise tax is about as unobtrusive a means as I can think of). It just means than the tax seems appropriate and in conformity with libertarian principles.
Even given the premise that the function of government should be "to increase liberty", it seems to me that it would increase my liberty if I could, e.g. drive on weekend nights rather than stay home for fear of drunk drivers.
Libertarianism is not anarchy. One basic premise of libertarianism seems to me to be to require people to bear the consequences of their actions. If one of the consequences of drinking is to pay a tax on the alcohol consumed, what's the problem with that?
Alcohol taxes are not a consequence of drinking; they are a consequence of politicians who tax.
It was also a time when I suspect that respect for law (even blind respect for stupid laws) was higher than it is today.
I agree that those who are the major problem of alcohol abuse are unlikely to turn to home brewing.
Because non-excessive users have no rational connection to the excessive users?
Are we ignoring the restaurant industry? Such a tax would cripple it. Anyone who has bought wine at a retail location after enjoying it at a dinner out can attest to the huge markups on alcohol. I have no clue what percentage alcohol sales comprise of the average restaurant's profitability, but I am sure it is substantial. Higher taxes means less profit for the owners, lower tips for the wait staff, etc. Since waiters are already in one of the lowest income brackets, this will only further depress their wages.
Let's also look at areas of the country who have built up tourism revenue based on being a wine destination. Napa, Sonoma, and Willamette Valley come to mind, but there are others. Would this cripple those places? Probably not, but there will be some effect, and it won't be positive.
Look, a lot of this can be measured with the right data, but let's not pretend that this will just affect a few guys at the InBev factory in St. Louis. Frankly, trying to make a compelling argument with such simplified, unsubstantiated claims is pretty foolish.
And, again, he gets off the argument bus at his stop. Why not tax skiing for the same reasons? Logically consistent individuals either don't get on the bus or ride it to the end of the line?
Because my glass of wine at dinner doesn't cost society a damned thing.
1. Alcohol consumers harm society. (Without exception. There are no beneficial results from alcohol consumption)
2. The amount of harm done is in direct proportion to the amount of alcohol consumed. (Passed-out drunks are more likely to drive drunk than those who have had a six-pack. End-stage alcoholics are the most abusive parents.)
3. Currently, the cost of harm produced by alcohol consumption is borne by all of society.
4. The fairest solution is to exempt the 30% of society who do not drink from paying for the harm, while taxing those who contribute to societal harm in proportion to their consumption.
As mentioned above, this logic can be applied to testosterone producers:
1. Testosterone producers harm society.
2. The amount of harm done is in direct proportion to the amount of testosterone produced.
3. Currently, the cost of harm produced by testosterone production is borne by all of society.
4. The fairest solution is to exempt the 55% of society who do not produce testosterone from paying for the harm, while taxing those who contribute to societal harm in proportion to their production.
To implement measurement and thus taxation, police officers will be allowed to set up testosterone checkpoints, where drivers' blood can be drawn.
The habit of thinking in term of "society" rather than the individual is invidious, and should be resisted on all levels.
(And also, especially, the conflation of "society" and "State"; "Society" punishes alcohol abusers with shunning and/or disdain.
The tax-man, the prison and the policeman are the tools of the State.
The State's decisions are not those of "society", even in a representative republic or democracy.)
If we entirely ignore the value of liberty and think in pure terms of utilitarian benefit, we can perhaps think such a scheme a good idea.
The rest of us will just look on boggle-eyed at the way other people (who are quite intelligent and well-meaning) are still, after the lessons of history, willing to throw all of that away on the basis of a dubious utilitarian calculus.
Prefer grass under most circumstances and higher booze prices would make a dime bag look that much bigger. So, this plan would, again IMV, increase crime.
Didn't they teach you that correlation does not equal causality?
Gee, almost every person I know that drinks alcohol started out by drinking milk; perhaps we should pass a tax on breast-feeding to reduce alcohol consumption.
Rather, it seems fairly obvious to me that, given that a majority of the people in this country in fact drink, it is only reasonable that a majority of those that use illicit drugs also drink, and it is also obvious that if they have substance abuse problems, it won't be just one substance.
The first is the question of parenting. Alcohol availability for teenagers at drunken parties makes that parenting harder, there is no question. My solution is contrarian, which is to expose my kids to responsible drinking early. My five year-old has never been drunk, but is relatively competent at tasting wine. Note, I have checked the laws, and in my state (Washington), this appears to be fully legal. My reasoning is that as long as alcohol is seen as something which is primarily consumed as a connoisseur, then there is less risk of him going to parties as a teenager and engaging in drunken behavior.
If one is worried about alcoholic parents, though, I see no reason to assume that legislation will ever turn bad parents into good ones. Parenting is difficult, and people either rise to the challenge or they don't.
The second issue has to do with other substitutes. Professor Cook seems to suggest that taxed alcohol does not have any acceptable substitutes, but this is hardly true. There are tax-exempt amounts for duty-free purchases (for those who live near the border), though these are fairly limited. More substantially there are considerable home-brew exempt amounts. Something that looks like elasticity may be remarkably deceiving.
The third issue is the question of federalism. Professor Cook is arguing for a federal alcohol tax increase, when perhaps this may rob tax revenue, and tax policy decisions from the states. Even if we assume that raising the excise tax is a good idea, which I am not convinced of, there is a second question of why the states should not be the ones making that decision and fully controlling the revenue.
The food analogy is inapt. The consumption of food is necessary for life itself and the main problem connected with food in human history--and for millions in our world today--has been the lack of food. Consumption of alcohol, although a pleasant experience that I share with you and others, is not a necessity for life.
The current problems resulting chronic overeating are overwhelmingly borne by the overeaters themselves, whereas many if not most of the problems of excess alcohol consumption are borne by others and/or society.
As to your last comment, the whole burden of the initial post was that those who consume excessive amounts of alcohol will ipso facto pay the major part of the tax on alcohol consumption. There is no practical way--short of the "tax Thunderbird, not Dom Perignon" argument from the last thread and the idea below--to impose the tax solely on the excessive drinkers.
One idea--increase the tax on alcohol served in bars based on the number of drinks a person has had and/or the time of day or night when the drinks are served, on the (pretty good in my opinion) assumption that the more drinks and the later at night, the more likely the consumer is to drive drunk.
The idea of introducing alcohol to children as a normal part of life is an excellent one. That's the practice in Europe, I believe. That focuses the child on thinking that the problem is in the excessive consumption and not in the alcohol itself, and from thinking of alcohol as a "forbidden fruit" which in my experience led to alcohol abuse.
The analogy I like is for a tax on soda (or pop if you prefer to call it that). There is a national effort to combat obesity (a fact that is undisputed). Soda causes obesity (most are just empty calories and include things like high fructose corn syrup) as well as other maladies (tooth decay, diabetes, etc.). Increased taxes on soda would almost certainly lead to decreased consumption and, presumably, lower rates of obesity.
It'd be easy for me to suggest increasing taxes on soda. I rarely drink the stuff and don't care for it one way or another. Why don't I? Well, I'm not a freedom-hating liberal professor who thinks he knows what's best for everybody else.
The return of "small beer" as a children's beverage? :)
David Drake: The food analogy is inapt. The consumption of food is necessary for life itself and the main problem connected with food in human history--and for millions in our world today--has been the lack of food. Consumption of alcohol, although a pleasant experience that I share with you and others, is not a necessity for life.
How about stiff taxes on refined sugar and fats, then? Consumption of donuts is also a pleasant experience rather than a necessity of life, and that approach is more likely to affect overeaters more heavily (no pun intended).
You also discount the externalities of overeating too quickly. Lower income overeaters pass significant health care costs on to the rest of society, and that problem is likely to increase as health care is "reformed" under the Obama administration.
New York State is proposing a tax on non-diet sodas using precisely this argument. (It's really revenue issue but obesity is the stated justification.)
To Mr. Mischief, who said the following:
"PfP said it first and best, We are interested in Liberty, not Order.
False dichotomy. Order is the prerequisite of freedom."
Improper understanding of concepts. Freedom is perfectly compatible with voluntary acceptance of self-imposed order -- indeed, freedom requires such order. Externally imposed order is tyranny, and simple majoritarianism is just tyranny by another name. And tyranny is indeed a major mischief.
I think the problem is that many of us owe Orin a beer, and Cook is trying to jack up the price tag on us.
The free lunch, the free concert, the free museum, etc., entice men to drink and become drunkards, when if no allurements were presented they would not think of drinking but would remain sober. The inducements offered to get men to enter a drinking saloon are simply a bait to catch the unwary. Connected with free concerts in low drinking saloons, are pretty, but depraved, waiter girls, who exert all their charms- and powers of fascination in coaxing and beguiling the victim into purchasing drinks—they receiving a commission on the sale. Inebriety by Franklin D. Clum (1888)
So let's tax concerts, museums, and girls as well.
Lots of groups have given out free lunches for various reasons. The Church of Ireland (an offshoot of the Church of England) used to serve soup during the Irish famine, but you had to listen to a sermon to eat it. Even today, calling someone a "souper" in parts of Ireland will get you a punch in the nose. So let's tax churches and soup.
The most famous exponent of the phrase was SF novelist Robert A. Heinlein, who came up with the TANSTAAFL principle: "There Ain't No Such Thing As A Free Lunch." He was talking about the so-called "free lunches" served in schools to poor children. He didn't object to feeding the poor, just to calling it free. Like "free" health care, someone paid for it.
Not exactly; what I meant is that the American governmental Ideal is the minimum order necessary to secure liberty, while the European Ideal is the maximum freedom compatible with good order - which is to say, none.
Of course, the American Ideal is largely honored in the breach. But it's there, somewhere.
Prof. Cook goes to great lengths to talk about the evil effects of excessive drinking, and uses this to advocate a taxation-based approach to partial prohibition. What he steadfastly ignores is the fact that modern medicine has found extraordinary benefits to moderate drinking -- such benefits that I, as a physician who did not drink until a few years ago -- have specifically started drinking in order to enjoy those benefits.
As one recent review noted:
A considerable body of epidemiology associates moderate alcohol consumption with significantly reduced risks of coronary heart disease and, albeit currently a less robust relationship, cerebrovascular (ischemic) stroke. Experimental studies with experimental rodent models and cultures (cardiac myocytes, endothelial cells) indicate that moderate alcohol exposure can promote anti-inflammatory processes involving adenosine receptors, protein kinase C (PKC), nitric oxide synthase, heat shock proteins, and others which could underlie cardioprotection. Also, brain functional comparisons between older moderate alcohol consumers and nondrinkers have received more recent epidemiological study. In over half of nearly 45 reports since the early 1990s, significantly reduced risks of cognitive loss or dementia in moderate, nonbinge consumers of alcohol (wine, beer, liquor) have been observed, whereas increased risk has been seen only in a few studies. Physiological explanations for the apparent CNS benefits of moderate consumption have invoked alcohol's cardiovascular and/or hematological effects, but there is also experimental evidence that moderate alcohol levels can exert direct "neuroprotective" actions-pertinent are several studies in vivo and rat brain organotypic cultures, in which antecedent or preconditioning exposure to moderate alcohol neuroprotects against ischemia, endotoxin, beta-amyloid, a toxic protein intimately associated with Alzheimer's, or gp120, the neuroinflammatory HIV-1 envelope protein. The alcohol-dependent neuroprotected state appears linked to activation of signal transduction processes potentially involving reactive oxygen species, several key protein kinases, and increased heat shock proteins. Thus to a certain extent, moderate alcohol exposure appears to trigger analogous mild stress-associated, anti-inflammatory mechanisms in the heart, vasculature, and brain that tend to promote cellular survival pathways.
(Collins, MA, et al. Alcohol in Moderation, Cardioprotection, and Neuroprotection: Epidemiological Considerations and Mechanistic Studies.Alcohol Clin Exp Res. 2008 Nov 19. [Epub ahead of print])
How does Prof. Cook count the cost of increased health care costs for those who stop drinking because of his economic incentives? Considering that many physicians encourage moderate drinking, how would he account for the millions and millions of dollars that would be spent caring for people with increased cardiovascular disease because they did not benefit from alcohol's prophylactic effects? How about the hundreds of millions for the care of needlessly advanced dementia? Such costs apparently are not important enough to be included in Prof. Cooks calculus, and those who wish to save themselves these costs should be punished by punitive taxation.
The hubrus of the social engineer never ceases to amaze me -- both in his disregard for liberty, and for his assumption that he alone knows what is best for everyone else
(1) It is difficult to objectively determine, and get wide agreement upon, just what the negative externalities are for any particular activity;
(2) The problem in (1) is an order of magnitude worse for trying to put a dollar amount on the alleged externalities.;
(3) Such proposals rarely, if ever, consider possible "positive" externalities of the activity you wish to cause a decrease in, or worse yet, the possible negative externalities of the action you propose to take to discourage the "bad" activity, (and (1) and (2) also apply here).
So, there is really no objective way to determine the possible savings, which are speculative at best, and the costs, which while they may be impossible to quantify, are nearly certain to be greater than zero.
You are left with whoever can manipulate the political process to get what they want.
In short, whenever someone starts to talk about negative externalities, I put my hand on my wallet so they won't try to steal it.
And certainly the price of prescription drugs should be raised to cover the costs of prescription drug abuse. A Rush Limbaugh should pay not only for the cost of recovering from his own Oxycontin addiction, but for the rehab of others, as well. Everyone who ever takes a Valium should pay his fair share.
Now we're just getting silly. Is there any reason to think that arsonists use substantially more gasoline than the average gasoline consumer, such that the burden of the arson recovery tax will be borne disproportionately by arsonists? I think Prof. Cook's idea is washed up, but several far more analogous analogies have been suggested.
I'm confused. A tax proposed based on the idea that it will mainly be paid by a minority and therefore be popular with the majority is usually seen as a form of tyranny.
What's to be confused? The Left intends a tyranny of their ideals. Because, of course, like global warming, they are right and everyone else is wrong. Stop questioning!
No. But in another context Prof. Cook has not needed to argue proportionality to advocate taxing a source of harm. (Prof. Cook has previously advocated taxing ammunition, simply as a way to discourage gun ownership, and not because more frequent shooters cause more death or injury.)
Unless you live walking or biking distance from the bar, work nights, and so on, no? The bias toward taxing as a means to desired social ends seems to be very strong for some, notwithstanding that it's a terribly blunt instrument. Better ones exist.
If you want to stop drunk driving, then democratically increase the penalties FOR DRUNK DRIVING. Leave the harmless alone.
Of course, there's a similar problem in the vast majority of incidents of government-punishable drunk driving result in no actual harm, while non-punishable driving while sleepy, enraged or inattentive do terrible harm.
I'd like to submit Philip Cook for the 2009 VC Iron-Balls Award.
The only voluntary acceptance of self-imposed order is anarchy. Any form of government by definition imposes order on those who do not want it.
Down with income taxes!
Tony Tutins:
I suspect this is not true at all and someone would have to be shockingly dumb to believe that statement.
Only among libertarians (since sin taxes go back to the Washington administration), and even that begs the question as to what constitutes the minimum order necessary to secure liberty.
Of course, when Congress passes this tax it will create an exemption for members of Congress so that the various Kennedys don't have to pony up their fair share.
No need for an exemption because the Kennedy clan will get back into the bootlegging business and replenish the family fortune.
As opposed to those on the Right who want religious tyrrany....
Maybe, but since Prof. Cook has so far deigned to respond to any of the main lines of criticism, it's not clear if it is courage or just tunnel vision and putting his hands over his ears.
If he does respond to any of the main lines of argument, then yes, it is courage and it is commendable.
Connected with free concerts in low drinking saloons, are pretty, but depraved, waiter girls, who exert all their charms- and powers of fascination in coaxing and beguiling the victim into purchasing drinks—they receiving a commission on the sale. Inebriety by Franklin D. Clum (1888)
Hooter's! I really like their wings and the new tatertots.
How much time do you think it takes to brew beer? Including bottling, I probably spend less time brewing a 5-gallon batch of beer than I typically do cooking a dinner. I use a lot of equipment in the kitchen for this: dishwasher w/extra heat to sterilize the bottles, stove to sterilize other tools and bottle caps, etc. And I even get the kids to help, so it is a family activity.
Secondly, home-brewing is IMMENSELY enjoyable. I have always brewed more than I have drank. This year of course there was the hops shortage so I took up low- and no-hops ale-brewing. I expect to make another recipe of rose-flavored amber-ale and try a new recipe I have concocted (lavender-flavored stout).
Also I made a couple gallons of wine with less than 1/2 hr worth of real work (that wouldn't have had to be done otherwise-- I did need to pick the grapes afterall) and the price of yeast (less than $2). The grapes weren't wine grapes (I suspect they were a kind of raisin grape), and the wine came out with a very unusual taste (strong overtones of grapefruit), but very pleasant nonetheless. If wine were to cost an average of, say, $20/bottle (after the tax raise Prof Cook proposes), and I get 10 bottles out of a batch, and I spend even 2 hrs, then I would need to make $100/hr in order to be losing money on that use of my time. Plus it is enjoyable, and, methanol* control aside, I end up with a wine which is entirely unique, pleasant, and tasty.
* Methanol, from the breakdown of pectins in the grape skins is common in wine. The FDA complains if the methanol content gets up above 1%. Most red wines are under 0.2%, and white wines are substantially lower. Interestingly, home-brewed moonshine probably has lower methanol-to-ethanol ratios than off-the-shelf wine does.
The part that Mr. Cook left out was a few underlying assumptions. That is ... more efficient if drinkers in aggregate were confronted with the full price of the aggregate decisions of all drinkers... might be more true to his aims of promoting taxation of all for the sins or consequences of a few.
There are in fact benefits to alcohol consumption for health, if done in proper dose. Increasing the cost to responsible drinkers might decrease the number of people able to imbibe sufficiently frequently to achieve therapeutic effect. This to is an externality, albeit in the opposite direction to some of the other effects of concern to the author.
Before he begins taxation as social engineering, he must consider all externalities; negative consequences of 'failing' to tax alcohol, plus the negative consequences of taxing alcohol.
In the end, it is probably better left up to the individual to select a dose of alcohol to imbibe without micromanagement by the government.
If some persons experience or cause negative effects with their drinking, then tax or penalize them appropriately to compensate for their external harms, but don't quash everyone's freedom to reign in a minority.
Because people here are often interested in the law in other jurisdictions, I'd like to point out that since 1950 or before, in Austria, ice cream is taxed at the same rate as alcoholic beverages (10%), while non-alcoholic beverages are taxed at 5%. I would say this is a luxury tax, or tax on hedonism, rather than an attempt to recover the cost of "negative externalities."
Why not just link to this person's scholarly work instead rather than have him post on the blog? Especially given the excellent and well thought out responses here by many active posters (not me).
I don't accept analysis blindly. I remember asking how effects of home brewing, alcohol culture, etc were filtered out. Thus far we haven't gotten an answer. Perhaps you would like to post your full analysis here so we can actually look at home brew limits in these states, alcohol culture differences, etc?
The man wants to impose a tyranny of his own design on a freedom loving country and you want us to be civil. At least we aren't yelling "Off with his head" or wanting to banish him to Siberia. For us this is civil.
Jeez this guy is dangerous to freedom loving individualists everywhere.
Um, exactly! This is a libertarian blog that doesn't like tyranny from the right or the left. If you thought this was a conservative blog you need to read more.
In short, I would like to see a proper analysis done, rather than just a quick set of averages and calling it causation.
The New York TImes got a Putlitzer Prize for exploring how successful Stalin's collectivization was. It wasn't until decades later we learned of the 5 million who starved to death. Or was it 10 million? Who's counting? Bill Ayers estimated 25 million Americans would need to be eliminated in order to have a successful Leftist government here.
But we are on to you. We know you are evil. When your students nod and regurgitate what you said, they know it's rubbish. At least the smart ones. They play the game.
First, there are various studies showing things like Red wine and perhaps other alchohol has some health benefits, one of which might be stress reduction. If we are to take your arguments into account, we need to factor in any positive effects that alchohol consumption produces beyond mere pleasure. It may not outweigh the costs, but it is needed a proper evaluation.
Second, your argument seems predicated on costs that come from the ABUSE of alchohol in some form or another, and NOT its consumption. Yes, I understand that you believe abusers would be much more impacted than non-users based on consumption rates. Still, the problems and costs of alchohol consumption are, as you admit, located pretty much within a minority who use it irresponsibly. It does seem illogical and certainly not fair to tax a product because of the abuse of it by a small part of the overall society.
Third and related to the second, as you pointed out, a more fair, equitable and perhaps ethical way to deal with the negative aspects of overindulgence is to penalize those behaviors which have the actual impact.
Let's take DUI, since it is the most closely related to alchohol consumption and the other social ills you mention have many fathers, so I think pinning them on alchohol is questionable at best.
You want to cut down dramatically on DUI? Triple the first time penalties and impound the car for a month, and with the second, force jail time and confiscate the car. This will definitely curtail the problem in the short run; prevent most people with any sense from driving drunk in the long run; will generate some revenue directly from those responsible; and for the damn fools or criminally irresponsible, not actually having a vehicle will prevent most from doing it again. If course, there are always people who will find another vehicle, but the numbers of repeat offenders will be vastly reduced.
This last point I think illustrates the problem with the concept of higher alcohol curbing consumption of the problem populace. Someone who will habitually drive drunk or abuse their kids is not going to bring down their consumption of alcohol. To them, responsibility is not their strong point, so if alcohol is a big feature of their life, they will conserve on other items (food for the kids, maybe?) to support the habit. Thus, I don't see how this really will address the core problems.
In regards to extra cash the rest of us will supposedly see from these taxes, color me skeptical. Any taxes collected and thus are sucked into the maw of state or local government is more than likely going to be wasted, and I am unlikely to see much of a benefit from it, let alone actual cash back in my hand. We need only to look at recent to realize that. Handing the government more money is almost always a bad idea, and when its not, its never a great solution.
In regards to non-governmental benefits, perhaps you have a point, but again, I am not sure how much that will come through to me in the end.
Finally, there is the simple liberty aspect of it. I resent being forcing to subsidize the bad behavior of others, or to phrase it another, paying for their mistakes, which I think is likely, given the reason above.
Even if I DO see some positives overall in my personal balance sheet from paying these consumption taxes, is this really the road we want to go down? The government and/or "concerned citizen groups" decide what is good or bad based on what a minority who abuse it, and are given even power to manipulate everyone's behavior pro-actively?
With this plan, you hand the government more power through cash which it will use as it wishes and now how it is intended, and hand it even more power by giving it the right to monitor and control what everyone does based on what some MIGHT do.
Respectfully, I don't think the costs of THAT are worth the supposed benefits of what you are proposing.
WG
Obviously the tax will be assessed by your Federally assigned physician at your mandatory annual checkup. Everyone already understands that the only way to get health spending under control is with greater government participation. Mandatory preventive medicine combined with government provided healthcare will dramatically increase order and massively reduce total costs to society.
Here's a starting point: rough figures for one side of the equation, number of drinks per year:
78.7 billion 12-ounce beers
21.5 billion 5-ounce glasses of wine
4.2 billion 1.5-ounce shots of distilled spirits
That's somewhere north of 104 billion alcoholic drinks per year. Interestingly, per capita consumption of alcohol has been dropping in the U.S. for nearly 30 years, even as alcohol taxes are apparently declining in real terms (per Prof. Cook).
On the other side of the equation, I've seen figures for the cost of drunk driving alone ranging from $6 billion to $114 billion. Obviously, a lot must depend on how you do the counting. The National Institute on Alcohol Abuse and Alcoholism says that alcohol abuse costs $185 billion a year, and that's using one of the lowest figures for drunk driving accidents — most of the cost, they say, is from lost productivity due to hangovers, etc. The NIAAA estimate also doesn't seem to cover some of the more attenuated social costs Prof. Cook had in mind, like "quality of parenting."
Tax driving, not drinking. Make bars and restaurants pay tax on every space in their parking lot to discourage drinking and driving.
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