Taxation of Alcohol Does Not Offset the Costs of Alcohol Consumption

Alcohol bottle and money.

A new report in U.S News shed a concerning light on something many Americans have taken for granted for a very long time. For many years, decades even, people have more or less justified the existence of massive, multi-billion dollar alcohol companies for a variety of reasons.

There are a lot of thoughts and ideas on why we’ve been “okay” with the existence of such huge industries that produce substances that are harmful to the human body. One of the main reasons has been a sort of unspoken understanding that these companies pay considerable taxes even to exist. And the American people, in turn, pay significant fees to purchase alcohol. This creates revenue for state and federal governments, which in a way can offset some of the harms caused by excessive alcohol consumption.

But a new report seems to indicate that taxation on the production and purchase of alcohol does very little to reduce alcohol’s overall burden on American taxpayers. And some might consider that alcohol taxation is a burden of its own in some ways. But the high costs on American society that come about as a result of heavy drinking are even more of a burden. And while alcohol taxation offsets some of the damage caused by heavy drinking, the U.S. alcohol problem has grown beyond state and federal efforts to curb it.

So what is the solution? Should Americans start drinking less? Or should we start taxing the production and sale of alcohol more? How about all of the above?

The Story

The U.S. News article compiled and presented data gathered from an extensive study published by the Journal of Studies on Alcohol and Drugs. According to the research, the cost of harm caused by excessive drinking is about $2 per drink—the government shoulders about 80 cents of that. And if a fee for something is taken on by the government, that’s another way of saying the cost is laid upon the American taxpayer.

Of the 80 cents per drink mentioned above, about 21 cents of that is offset by state and federal alcohol taxes. But that still means 59 cents per drink of all excessive alcoholic beverages consumed in the United States each year is levied on the taxpayer. We are talking about people who mostly have nothing to do with excessive drinking—moderate drinkers maybe or people who don’t drink at all.

Quoting the research for clarity: “Total alcohol taxes accounted for a median of 26.7% of the economic cost to the government, and 10.3% of the total economic cost of excessive drinking.”

Drink Less or Tax Alcohol More—or Both

Alcohol bottle smashing a car.

When someone drinks excessively and then, say, gets in a car accident, that is a highly costly event. Some of the costs of the car accident are levied back onto the driver or his next of kin. But much of the collateral damage (the use of ambulances, police officers, the fire department, hospital visits, damaged property, funeral expenses, road repair, disposal of damaged or totaled cars, etc.) is often paid for by the government, i.e., the taxpayer. And if revenue from alcohol production and sales does not come close to the overall cost of the damage caused by heavy drinking, then American taxpayers everywhere are shouldering the financial burden of alcohol misuse.

The senior author of the research discussed in the U.S. News article spoke on the issue. He conversed with sincerity on the incredulity of the cost of excessive drinking in the United States. According to Dr. Timothy Naimi, “The disparity between alcohol-related cost to government and alcohol taxes amounts to a large taxpayer-funded subsidy of excessive drinking and alcohol companies. Increasing alcohol taxes could improve public health and reduce the disparity between alcohol-related costs and alcohol taxes in states.”

The U.S. News article also discusses how increasing alcohol taxation has, in the past, improved public health and reduced the burden of alcohol-related costs on the American taxpayer. Currently, the federal government charges a standard tax on all alcohol. Five cents per drink for beer. Four cents per drink for wine. Sixteen cents per drink for distilled spirits.

Here’s another study author, Dr. Jason Blanchette, on alcohol taxation: “Policy debates around alcohol taxes have mostly centered on public health benefits, but I think our study might change the focus of the debate somewhat, since it seems fair that those who drink the most, and who produce and sell alcohol should cover the costs to society.”

It’s Not Just Taxation That Can Help

While increasing taxation on alcohol can help reduce drinking, it’s not going to do all of the work for us. And luckily, it doesn’t need to. We can also institute educational programs into schools about the harms and dangers of drinking. We can hold community programs and events for raising awareness. We can take our friends who drink too much to support groups. We can encourage those who are addicted to alcohol to seek treatment.

When people understand why they shouldn’t drink to excess, the taxation issue of alcohol won’t matter as much. This is because people will simply be avoiding alcohol not because it costs too much, but because they see why they should not drink.

Help Alcohol Addicts Seek Treatment

Husband having alcohol problem.

We need to have the conversation on alcohol taxation include how all Americans need to commit themselves to drink less. But it’s a conversation that will ring on deaf ears unless we can also help the 15 million people who have a legitimate alcohol addiction, according to the National Institute on Alcohol Abuse and Alcoholism. Quoting the NIAAA: “According to the 2015 NSDUH, 15.1 million adults ages 18 and older (6.2 percent of this age group) had AUD [alcohol use disorder]. This includes 9.8 million men (8.4 percent of men in this age group) and 5.3 million women (4.2 percent of women in this age group).”

That data is more than a little bit concerning. Eight percent of men ages 18 and older and 5 percent of women ages 18 and older are addicted to alcohol. We need to tackle this problem from several angles. It would be a wise move to raise taxes on alcohol at both the federal and state levels. It would also be a smart move to encourage Americans to drink less and to provide the American people with educational material and other preventative efforts to accomplish just that. Americans need to know why they should drink less. They can’t just be told to.

But the alcohol problem as a whole is not going anywhere until the millions of Americans who are addicted can get help for their problems. They cannot kick their habits on their own. They need professional help. With the assistance of residential drug and alcohol addiction treatment centers, anyone who struggles with even the most horrendous of alcohol problems can break free and get clean. If you know someone who is struggling with alcohol addiction, make sure they get professional help at a qualified treatment center as soon as possible.


Reviewed and Edited by Claire Pinelli, ICAADC, CCS, LADC, RAS, MCAP



After working in addiction treatment for several years, Ren now travels the country, studying drug trends and writing about addiction in our society. Ren is focused on using his skill as an author and counselor to promote recovery and effective solutions to the drug crisis. Connect with Ren on LinkedIn.