“To help put alcohol taxes in perspective: the federal tax on a pack of cigarettes is now approximately $1, and states and localities can layer on additional taxes. Customers in New York City, for instance, pay a $5.35 state tax and an additional $1.50 city tax for a combined total of $6.85 per pack — far beyond the average state tax of $1.93 nationally. Meanwhile, since the mid-20th century, relative alcohol tax rates have receded by roughly three quarters and have fallen well below those in other high-income countries, in contradistinction to trends in taxation of nicotine products. It has been repeatedly shown that demand for “sin goods” such as cigarettes exhibits substantial price elasticity: higher costs are associated with lower consumption.
Some observers might suggest that nicotine taxes increased over the latter half of the 20th century because the lies and liability of Big Tobacco became front-page news. The immense mortality burden from smoked tobacco in the United States still represents an estimated 450,000 to 480,000 deaths per year. But death counts are only one way to gauge societal harms and the public health implications of a given product, and death is a lagging indicator; many years of illness and impaired quality of life often precede a death attributable to alcohol consumption. Smoking is associated with an average of a 10-year reduction in lifespan; excessive alcohol use, by comparison, shortens people’s lives by an astounding 26 years, on average. Alcohol use thus results in not only more years of productivity and life lost at the population level, but also a tremendous burden of chronic disease, injury, psychiatric complications, and external factors (e.g., harm to others from motor vehicle accidents and effects on family members such as children).
There are, of course, limits to practical taxation rates. Excessively high taxes on any product, including alcoholic beverages, will drive consumers to gray and black markets and potentially to the use of riskier alternatives. For instance, there is great variation in state-level excise taxes on alcohol (ranging from $0.02 in Wyoming to $1.29 in Tennessee per gallon of beer, according to the nonprofit Tax Foundation) that drives such consumer behavior as tax avoidance and cross-border purchasing. But alcohol tax rates are so low by historical standards that marginal tax increases could supply substantial funding for health programs without risking engendering illegal activity. Additional concerns about any prospective tax change revolve around whether it will be progressive or regressive. Sales taxes in general hit low-income consumers hardest, but regressive effects of alcohol taxes are likely to be small and concentrated among heavy consumers — the very people who are at greatest risk for physical and psychiatric complications. Most important, young people are especially price-sensitive and are also at the greatest risk for motor vehicle accidents, injuries, and progression to addiction.
It is worth considering the function of taxation in general. Does taxation exist primarily to raise revenue, or also to provide incentives for certain behaviors? How can taxes be best targeted to provide funds, such as for critical public health infrastructure and treatment costs, while reducing burdens on taxpayers and, ideally, improving rather than disrupting market efficiencies? Excise taxes on products that harm both users and others are a clear example of targeted taxes that can change behavior and save costs while generating revenue for crucial health programs. Perhaps it is time to raise a round.”
Full article, AR Williams, New England Journal of Medicine, 2025.4.26