Work

Do the Effects of Alcohol Excise Taxes Differ by Drinking Level and by Income Level?

Year: 2024

Type: article

Abstract: We study the effect of excise alcohol taxes on ethanol consumption and prices paid for alcohol purchases. For our analysis, we exploit an unexpected and large increase in excise taxes that substantially raised alcohol prices in the state of Illinois in 2009. We combine rich, nationally representative household-level data on alcohol purchases with a synthetic control approach that allows us to compare prices paid and purchasing behavior in Illinois with the same behaviors in a weighted set of control states. We show that heavy and moderate drinkers reduced their ethanol consumption by a similar magnitude, thus casting doubt on the notion that heavy drinkers are less responsive to higher alcohol taxes. We also find similar responses for low and high-income households but document that low-income households pay more for ethanol after tax increases, thus supporting concerns about the regressive nature of alcohol taxes.

Source: National Tax Journal

DOI: 10.1086/732146

Authors: Henry Saffer, Markus Gehrsitz, Michael Grossman

Institutions: The Graduate Center, CUNY, National Bureau of Economic Research, City University of New York, University of Strathclyde

Language: English

Topic: Economic and Fiscal Studies

Subfield: Economics and Econometrics

Field: Economics, Econometrics and Finance

Domain: Social Sciences

SDG: Reduced inequalities

Open Access status: green

Funders: University of Chicago, Booth School of Business, University of Chicago, National Institute on Alcohol Abuse and Alcoholism