benefit principle of taxation with diagram

At the state and federal levels, inflation-adjusted alcohol taxes have declined considerably since the 1950s. Currently in the U.S., alcohol taxes are beverage-specifıc (i.e., they differ for beer, wine, and distilled spirits) and are usually “nominal” taxes, meaning they are based on a set rate per unit volume and are not adjusted for inflation (i.e., they generally remain stable as the cost of living increases). Alcohol taxes are promulgated primarily by federal and state governments, but can be instituted at the local or county level.

4 Based on economic theory, therefore, increasing the price of alcohol would be expected to lower alcohol consumption. One of the fundamental laws of economics is that quantity demanded of a product is inversely related to its price (Law of Demand). 2 Alcohol consumption by underage drinkers also contributes to the three leading causes of death among adolescents (unintentional injuries, suicide, and homicide), 3 and any underage drinking is considered excessive. Excessive alcohol consumption contributes to a variety of health and social problems, including unintentional injuries (e.g., injuries due to motor vehicle crashes) suicide homicide liver cirrhosis gastrointestinal cancers vandalism and lost productivity. The impact of a potential tax increase is expected to be proportional to its magnitude and to be modifıed by such factors as disposable income and the demand elasticity for alcohol among various population groups.Įxcessive alcohol consumption is the third-leading actual cause of death in the U.S., 1 and each year it accounts for approximately 79,000 deaths and 2.3 million years of potential life lost (about 29 years of life lost per death /ardi/Homepage.aspx). According to Community Guide rules of evidence, these results constitute strong evidence that raising alcohol excise taxes is an effective strategy for reducing excessive alcohol consumption and related harms. Among studies restricted to underage populations, most found that increased taxes were also signifıcantly associated with reduced consumption and alcohol-related harms. Nearly all studies, including those with different study designs, found that there was an inverse relationship between the tax or price of alcohol and indices of excessive drinking or alcohol-related health outcomes.

Seventy-two papers or technical reports, which were published prior to July 2005, met specifıed quality criteria, and included evaluation outcomes relevant to public health (e.g., binge drinking, alcohol-related crash fatalities), were included in the fınal review. A systematic review of the literature to assess the effectiveness of alcohol tax policy interventions for reducing excessive alcohol consumption and related harms was conducted for the Guide to Community Preventive Services (Community Guide).

Benefit principle of taxation with diagram