Published economic analysis predicts a ten-cent per drink tax or fee will reduce consumption by 3.3% for beer, 4.4% for wine, and 4.7% for spirits, resulting in corresponding drops in revenue.4 But this does not tell the whole story...
l Economic research also shows that the industry passes on more than 100% of the increase to drinkers, from 1.6 to 2.1 times the amount of the tax.5 The additional increase in retail price more than compensates for lost revenue and enables industry to maintain pre-tax profit levels. Some sectors may even make more money after a tax increase.
l Corporations may claim dramatic job losses from tax increases so that they can raise prices, lay off workers to cut expenses, and use the government as a convenient scapegoat. In reality, revenue and profits will adjust to remain at pre-hike levels (or become higher), so that unnecessarily trimming the workforce only increases profits further.6
l Alcohol taxes and fees can raise millions, and potentially billions, of new revenue for states and the federal government, through which many new jobs can be created – jobs that will promote health and wellbeing for all residents.
l The relatively minor drops in consumption from higher taxes can save government money in costs (such as health care) from the problems caused by alcohol use.
l The Maryland legislature voted to increase the retail sales tax on alcoholic beverages from 6% to 9%, starting in July 2011. Despite claims by the Distilled Spirits Council of the United States (DISCUS), the tax increase did not cause a substantial drop in consumption. The net increase in tax revenue, even with the minor drop in consumption resulting from the tax increase, is estimated at $38 million annually.7, 8
Published economic analysis predicts a ten-cent per drink tax or fee will reduce consumption by 3.3% for beer, 4.4% for wine, and 4.7% for spirits, resulting in corresponding drops in revenue.4 But this does not tell the whole story...l Economic research also shows that the industry passes on more than 100% of the increase to drinkers, from 1.6 to 2.1 times the amount of the tax.5 The additional increase in retail price more than compensates for lost revenue and enables industry to maintain pre-tax profit levels. Some sectors may even make more money after a tax increase.l Corporations may claim dramatic job losses from tax increases so that they can raise prices, lay off workers to cut expenses, and use the government as a convenient scapegoat. In reality, revenue and profits will adjust to remain at pre-hike levels (or become higher), so that unnecessarily trimming the workforce only increases profits further.6l Alcohol taxes and fees can raise millions, and potentially billions, of new revenue for states and the federal government, through which many new jobs can be created – jobs that will promote health and wellbeing for all residents.l The relatively minor drops in consumption from higher taxes can save government money in costs (such as health care) from the problems caused by alcohol use.l The Maryland legislature voted to increase the retail sales tax on alcoholic beverages from 6% to 9%, starting in July 2011. Despite claims by the Distilled Spirits Council of the United States (DISCUS), the tax increase did not cause a substantial drop in consumption. The net increase in tax revenue, even with the minor drop in consumption resulting from the tax increase, is estimated at $38 million annually.7, 8
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