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~ ~ SCIENCE SPI ~uBTHE INTEREsr ~ Nn'„hrr ,.r Nutrition Action Healthletter Federal Alcohol Tax Facts T'he alcohol in beer and wine is taxed at much lower rates than the alcohol in liquor. This inequitable tax policy was originally based on a flawed assumption-that the alcohol in hard liquor is more harmful than that in a can of beer or glass of wine. 'Ibe amounts of alcohol in a 12 oz. beer, a 4.7 oz. serving of wine, and a 1.4 oz. serving of liquor are roughly equal-yet each is taxed at a different rate. In FY 1992 federal alcohol taxes generated $7.9 billion in revenue. Increased Revenues And Decreased Costs Based on three different tax-raising formulas, the federal government could net anywhere from $4.5 billion to $23 billion annually in new revenues. In addition, these same scenarios would reduce alcohol's costs to society from as little as $2 billion to as much as $12 billion annually due to decreases in alcohol-related problems. Raise Beer And Wine Taxes To Liquor Rate 1 Year 5 Years Net new revenues: $4.5 billion $22.46 billion Reduction in alcohol problems: 2.1 % Reduction in costs to society: $2.2 billion Adjust All Rates For Inflation 1970-1992 1 Year 5 Years Net new revenues: $8.7 billion $43.47 billion Reduction in alcohol problems: 3.8% Reduction in costs to society: $4 billion Adjust Liquor Rate For Inflation Since 1970 and Raise Beer And Wine Taxes To Liquor Rate 1 Year 5 Years Net new revenues: $23.4 billion $117 billion Reduction in alcohol problems: 11.5% Reduction in costs to society: $12 billion Experts And The Public Support Higher Alcohol Excise Taxes The Surgeon General's Workshop on Drunk Driving recommended that the federal government equalize beer, wine, and liquor rates, adjust for past inflation, and annually adjust for inflation. The Final Report of the National Commission for Drug Free Schools (September 1990) recommended that the federal government increase taxes to deter young people from using alcohol. In a December 1992 article in the Journal of the American Medical Association, a compilation of three polls showed a 76% approval rating for higher alcohol and tobacco taxes to fund a national health insurance program. According to a May 1990 Tune poll, 72% of those polled favor raising taxes on alcoholic beverages. -over- 1875 1875 Connerticut Auenue. NW. Suite 300, Waslnngton, D.C. 20009-5728 •(202) 332-9110 • FAX (202) 265-4954 Exe:utive Director: Midaael ktcobson. Ph.D.

In a May 1990 New York Tunes poll, 80% thought that increasing the tax on beer and liquor was acceptable. A spring 1990 Wall Street JournaI/NBC poll found 83% of those polled favoring higher alcohol excise taxes. In 1986, and again in 1990, over 70 prominent economists signed a petition to increase alcohol excise taxes, and to eliminate or modify the differential treatment between beer, wine, and liquor. 1993 Federal Excise Tax Rates BEER WINE LIQUOR 12 oz. $.05 4.7 oz.$.04 (80 proof) 1.4 oz.S.12 6-pack .33 750 m1.21 750 ml 2.14 Federal Excise Tax Rates Equalized BEER WINE LIQUOR 12 oz. $.12 4.7 oz.$.12 (80 proof) 1.4 oz.S.12 6-pack .70 750 ml .64 750 ml 2.14 Federal Excise Tax Rates Adjusted for Inflation and Equalized BEER WINE LIQUOR 12 oz. 5.33 4.7 oz.S.33 (80 proof) 1.4 oz.$.33 6-pack 1.97 750 ml 1.81 750 ml 6.02 A February 1993 report from the Congnessional Budget Office provides a deficit reduction option that would equalize the tax rates on beer and wine to a rate of $16.00 per proof gallon of liquor. This boost would yield new revenues of $ 22.6 billion in five years. Excise Taxes And Public Health The Surgeon General's 1988 Workshop on Drunk Driving concluded that an increase in the excise tax could have the largest beneficial long-term effect on alcohol-impaired driving of all the policy and program options available. Because higher taxes would increase the cost of alcoholic beverages, they would decrease consumption and decrease alcohol-related problems. Studies on the effect of increased state taxes on alcohol found declines in auto fatalities and liver-cirrhosis deaths. Congress has rarely raised excise taxes despite the facts that inflation was eroding the value of the taxes and that higher rates could generate billions of dollars in new revenue. Since 1951 the federal taxes on beer and wine have been increased only once, in 1990. Over the same forty years, the tax on liquor was increased slightly in 1985 and again in 1990. Partially due to the declining value of tax rates, the average price of alcoholic beverages fell by ~ 25 percent behind the overall Consumer Price Index between 1967 and 1982 and has remained at that 0~ level since then. ~ February 1993 ~ N