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Alcohol Taxes Can Improve Health, Lead to More Jobs

Alcohol tax increases reduce the harms resulting from excessive alcohol consumption, and may lead to a small net increase in the number of jobs, according to new research released today at the American Public Health Association's 142nd Annual Meeting in New Orleans.

The researchers also unveiled a new online tool estimating the impact of different alcohol tax scenarios on jobs for each of the 50 US states and Washington, D.C.

According to research from scientists with the University of Illinois at Chicago and the Center on Alcohol Marketing and Youth (CAMY) at the Johns Hopkins Bloomberg School of Public Health, even modest increases in alcohol tax can lead to a net gain in employment. In California, an additional tax of five cents per drink could create about 21,500 jobs if the tax revenue is put in the government's general fund, while a twenty-five cent per drink tax could generate more than 95,000 total jobs. In Texas, the same tax increases would create about 7,800 and 35,000 jobs, respectively. In Louisiana, an additional tax of five cents per drink could create about 850 jobs for the state, and a twenty-five cent per drink tax would yield about 3,800 jobs.

Additionally, excessive drinkers also pay more of these taxes — 77% in California, 80% in Texas and 82% in Louisiana, for example — than non-excessive drinkers. Excessive alcohol use is associated with approximately 88,000 deaths each year and cost the U.S. $223.5 billion in 2006, or $1.90 a drink. The total federal and state taxes on alcoholic beverages were approximately $0.12 per drink in 2006.

"Alcohol tax increases are an evidence-based approach to improving health, and importantly, yield a small net increase in jobs," said study author David Jernigan, PhD, CAMY's director. "Our new online tool is designed to help communities across the country determine how different alcohol tax scenarios could impact employment in their state, and also provides quantitative information on how much consumers would pay based on their drinking habits."

According to researchers, critics have long argued that alcohol tax increases result in job losses. 

"This new research suggests this argument is not only false, but that alcohol taxes can actually lead to more jobs," said study author Frank J. Chaloupka, PhD, distinguished professor of economics at the University of Illinois at Chicago. "Money not spent on alcohol coupled with the newly raised tax revenues will be spent on other goods and services which will create jobs in non-alcohol sectors, offsetting any losses experienced in alcohol sectors." 

The impact of alcohol tax increases was computed using the Regional Economic Models Inc. simulation model, which produced four alternative tax scenarios: $0.05, $0.10, $0.25 per drink in excise taxes and 5% in sales tax on alcoholic beverages. Authors explained that "a basic law of economics is that when products become more expensive, people tend to purchase less of them, and this same basic principle holds true for alcohol as well."

— Source: American Public Health Association