California's Proposal to Raise "Sin Tax" on Alcohol

Prohibition era and earlier thinking about alcohol demonized its consumption and derided its costs to society. Consequently, sin taxes have historically been levied on alcohol in the United States due to alcohol's image as an immoral, unhealthy, and socially costly endeavor. With the federal government and states throughout the nation facing multi-billion dollar budget deficits, proposals to increase the "sin tax" on beer, wine, and other alcohol have been introduced in at least twenty-two individual states and have been considered in the United States Congress.

In California, Assembly Member Jim Beall has been at the forefront of the effort to increase taxes on alcohol in the state. Assembly Bill 1694 (AB 1694) of 2010 outlined an aggressive increase in taxes on beer, wine, and distilled spirits. According to Assembly Member Beall, alcohol-related problems cost the citizens of California $38.4 billion annually in "alcohol-related illness and injury, criminal justice, lost productivity, and impacts on the welfare system, fire and law enforcement response, trauma and emergency care, and the foster care system, among other costs." AB 1694 claims that alcohol use "drains California's state and county governments of approximately $8.3 billion annually in increased . . . costs . . . ."

Assembly Member Beall's bill did not pass the California legislature. If it had, taxes at the first point of sale in the state would have increased by $0.53 per gallon of beer, $1.28 per "wine gallon" of wine, and $4.27 per "wine gallon" of  distilled spirits, raising over $1.4 billion annually for the state of California.

There is no doubt that alcohol-related costs affect California's bottom line; but many other behaviors do as well. Consider the following: a study by the Rand Corporation found that air pollution from cars and other sources in Central and Southern California alone cost hospitals in the area nearly $200,000,000 from 2005-2007. Over $27,000,000 of those costs were borne by the state of California and the federal government paid an even greater amount. Statewide costs are almost certainly higher with proportional increases in state and federal costs. And the study only analyzed direct emergency room visits, not costs like "lost productivity" and other long term expenses as Assembly Member Beall did for purposes of calculating the cost of alcohol-related problems in AB 1694.

Efforts by Assembly Member Beall and others in California and throughout the United States rely on social attitudes toward alcohol that harken back to the prohibition era and earlier attempts to demonize "intoxicating liquors." Alcohol consumers are an easy target: while beer, wine, and other liquors are enjoyed socially, they are not seen as an essential component of a functioning society. Instead, alcohol consumption is associated with other undesirable effects like those listed in AB 1694. The conclusion is that increasing taxes on alcohol will raise necessary funds for the government on the back of individuals engaging in a behavior that is largely disapproved of by society (or at least not valued).

If the true purpose of AB 1694 is to increase taxes on a behavior that costs California state and county governments millions of dollars each year, why single out alcohol consumption? Why not also increase taxes on air pollution activities in proportion to the costs borne by California state and county governments? The answer is simple: alcohol consumption is a luxury that society has summarily decided provides little-to-no social benefit while costing taxpayers millions of dollars. Prohibition era thinking about alcohol apparently still controls the public debate. Based on historical precedent, therefore, alcohol consumers in California and throughout the United States can expect proposals like AB 1694 for years to come.