As states struggled to reduce looming deficits and find revenue sources in 2009, 25 legislatures introduced bills to increase alcohol revenue. Raising alcohol taxes is one of the most effective strategies to decrease underage drinking, as well as adult over-consumption, and the related harm. Thus increasing alcohol taxes serves two important purposes: generating additional revenue and decreasing harm.
The purpose of this report is to assess the 2009 legislative session for how successful states were in passing alcohol tax bills. In doing so, we have used standard economic analysis to estimate how much revenue was gained, and how much potentially lost.
Of the 25 states with one or more proposals for increased alcohol taxes in 2009, six successfully raised taxes and can expect additional revenue from alcohol sales. The grand total increase in annual revenue for these states (Illinois, Kentucky, Massachusetts, New Jersey, New York, and North Carolina) is $340 million. Meanwhile, proposals for alcohol tax increases in fourteen states died this year, leaving between $2.57 and $2.74 billion of potential state revenue on the table.
Ten states still have alcohol tax legislation pending as of November 2009. For example, California’s Assembly Bill 1019 would impose a fee upon alcoholic beverages to be used exclusively for alcohol-related service programs to mitigate harm caused by alcohol products. The estimated annual revenue from AB 1019 is $1.4 billion.
Trends from alcohol tax legislation in 2009 include directing revenue towards specific alcohol- related programs; levying the tax in unconventional ways; and a consistent lack of indexing the alcohol tax rate to the inflation rate, a measure that would avoid losing real value over time. In light of these trends, Marin Institute recommends:
- Legislators and state advocates should revisit alcohol tax rates in their states and consider introducing new legislation to increase alcohol taxes and “charge for harm” to hold the alcohol industry accountable for its products.
- In new legislation to increase alcohol taxes, policymakers should:
- Allocate revenue to programs and services that address underage and excessive drinking and various types of alcohol-related harm.
- Index the tax rate to inflation, so the real value does not decrease over time.
- Make the tax increases permanent, not on an “emergency” basis.
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