NATIONAL BUREAU OF ECONOMIC RESEARCH
NATIONAL BUREAU OF ECONOMIC RESEARCH

Measuring the Effects of the 1991 Federal Alcohol Tax Increase

[A tax induced increase of 6 percent in alcohol prices] resulted in a reduction of 4.7 percent in injury deaths nationwide.

Because consumers reduce alcohol consumption in response to price increases, rising excise taxes on alcohol are associated with reduced levels of alcohol abuse and the related consequences for public health and safety. In The Virtuous Tax: Lifesaving and Crime-Prevention Effects of the 1991 Federal Alcohol-Tax Increase (NBER Working Paper No. 17709), authors Philip Cook and Christine Piette Durrance estimate the effects of a change in the federal tax on alcohol that took place on January 1, 1991. The federal government doubled the tax on beer and raised tax rates on wine and spirits as well, and alcohol prices jumped an average of 6 percent (adjusting for overall inflation) nationwide.

The authors find that this price increase resulted in a reduction of 4.7 percent in injury deaths nationwide during the first year. Both violent and property crime also declined after this increase in the federal tax on alcohol. Violent crime -- especially robbery, aggravated assault, and rape -- was apparently more sensitive to the level of alcohol consumption within a state than property crime. Among the category of property crimes, burglary and motor vehicle theft rates were most sensitive to a state's per capita alcohol consumption after the tax increase. The authors' results demonstrate that the alcohol-price elasticity for several health and safety outcomes is closely related to average alcohol consumption.

-- Lester Picker

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