Alcohol Taxes and Fees:

1

• Alcohol Taxes and Fees
• An economic and historical perspective
• Bruce Lee Livingston, MPP
• Executive Director - Marin Institute
• Assembly Select Committee on Alcohol and Drug
  Abuse
• March 6, 2008

2
A Brief History of California Tax/Fee Proposals

• 1990 failed initiative of 5 cent increase
• industry spent 30 million to defeat
• 1992 - last alcohol excise tax increase,
• a penny per drink
• 2003 SB 108 (Romero) 5 cent fee proposal for
  alcohol-related emergency services
• 2003 AB 216 (Chan) Fee proposal for up to
  100 million for youth recovery/prevention
• 2006 SB 656 (Romero) Proposal to allow
  counties to assess sales tax for on-premise
  consumption,
• for revenue purposes only

3
California Excise Tax Rates Lower than Other
States, the World(Rates are per gallon, US
dollars)

• CA Ave. w/Fed UK Sweden
• Beer .20 .25 .58 4.44 3.59
• Wine .20 .79 1.07 14.09 13.21
• Spirits 3.30 3.97 11.10 64.06
  119.96
• CA tied for third lowest in wine rate, with
  Texas only New York and Louisiana lower
• Due to inflation, real value of CA taxes have
  declined 45 percent since 1992

4
CA Alcohol Taxes, 1969-2002
5
CA Alcohol Taxes, 1985-2002
6
U.S. Alcohol Taxes, 1950-2002

In 2002 Dollars
Source BATF, 2003 BLS, 2003
7
Bigger Budgets need Bigger Taxes

• In 1992, the 302 million in alcohol excise tax
  revenues, covered 0.35 of the states 85
  billion budget.
• In 2005, with the budget expanding to 173
  billion, the 318 million collected from alcohol,
  covered only 0.18 of our budget.
• Alcohols excise tax contribution to the budget
  is half of what it was in 1992.

8
Costs of Alcohol in California(preliminary
estimates by Marin Institute)

• More than 9,000 lives lost annually
• Economic costs include
• Lost productivity 22.3 billion
• Criminal justice 7.3 billion
• Healthcare 6.4 billion
• Total costs 36 billion
• About 2/3 or 4.3 billion of healthcare is
  covered by government programs

9
How Big a Fee for health care or prevention
programs?

• About 2/3 of medical costs
• are incurred by government programs
• 4.3 billion of healthcare costs from alcohol
• out of 6.4 billion annually

10
Alcohol Industry Pays Small Portion of Total Costs

• Sales taxes 1.56 billion
• Excise taxes 318 million
• License fees 50 million
• Total paid 1.94 billion
• Percentage of total costs covered
• by current taxes and fees 5
• Jobs are claimed as economic benefit,
• but reductions in alcohol consumption mean
• consumers purchase in other sectors.

11
Alcohol Excise Taxes Lag Far Behind Tobacco
Revenues(Figures for 2005/2006)

• Tobacco tax revenue 1.09 billion
• Tobacco costs 19 billion
• Alcohol tax revenue 318 million
• Alcohol costs 36 billion
• Tobacco taxes are 6.5 times as effective
• as alcohol excise taxes in internalizing harm

12
Proposed Alcohol Tax Increase

• Option one
• Across-the-board, 25 cent per drink increase on
  beer, wine and spirits
• Additional Revenue Generated 3 billion
• Option two
• Bring beer (which causes the most harm),
• up to tax level for distilled spirits
• Additional Revenue Generated 2 billion
• (Adding wine generates 300 million more)

13
Taxes or Fees Could Cover

• Emergency room and trauma care
• Medi-Cal coverage for illness, injury
• Mental health and alcohol treatment
• Dedicated alcohol prevention programs
• (at ADP)
• Alcohol ad monitoring and counter-ads
• Policing of liquor stores, crime prevention
• Traffic safety, injury prevention

14
Impact on Consumers of Taxes or Fees

• About 1/3 of population does NOT drink.
• Of those who DO DRINK
• Average is 3 drinks per week
• 50 drink 95 of total volume
• 10 drink 55 of total volume
• Source Paying the Tab, by Philip Cook
• Impacts felt hardly at all by most,
• while reducing harm from over-consumption.

15
Public Support for Raising Tax?

• Polling done well ahead of 1990 initiative
• 73 percent said they would support a
  nickel-a-drink tax
• People more likely to support alcohol tax or fee
  increases when they know the money will be
  directed to alcohol-related programs

16
Challenges Influence of Industry

• Industry spent more than 30 million to defeat
  1990 tax initiative
• Several legislative attempts failed since the
  penny-per-drink increase in 1991
• According to a Marin Institute report,
• Big Alcohol donated 3.5 million
• to CA politicians in 2006 and
• spent additional 3 million on lobbying

17
Possible Actions

• At minimum, charge alcohol user fee to cover ADP
  and ABC services. (200 M or more)
• The nexus is overwhelming.
• Adjust alcohol excise tax for inflation (.7 B)
• Consider 25 per drink excise surcharge (3 B)
• Consider 30 beer only excise surcharge (2 B),
• as beer is teen drug of choice, greatest harm
  and greatest revenue
• Make the alcohol producer pay, not the taxpayer

18
Contact Information

• Bruce Lee Livingston, MPP
• Executive Director
• BruceL_at_MarinInstitute.org
• [phone] (direct)
• www.MarinInstitute.org