The effect of alcoholic beverage excise tax on alcohol-attributable injury mortalities

Abstract

This study examines the effect of state excise taxes on different types of alcoholic beverages (spirits, wine, and beer) on alcohol-attributable injury mortalities—deaths caused by motor vehicle accidents, suicides, homicides, and falls—in the United States between 1995 and 2004, using state-level panel data. There is evidence that injury deaths attributable to alcohol respond differently to changes in state excise taxes on alcohol-specific beverages. This study examines the direct relationship between injury deaths and excise taxes without testing the degree of the association between excise taxes and alcohol consumption. The study finds that beer taxes are negatively related to motor vehicle accident mortality, while wine taxes are negatively associated with suicides and falls. The positive coefficient of the spirit taxes on falls implies a substitution effect between spirits and wine, suggesting that an increase in spirit tax will cause spirit buyers to purchase more wine. This study finds no evidence of a relationship between homicides and state excise taxes on alcohol. Thus, the study concludes that injury deaths attributable to alcohol respond differently to the excise taxes on different types of alcoholic beverages.

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Fig. 1a–d
Fig. 2a–d
Fig. 3a–d

Notes

  1. 1.

    Under the age of 25, cause of death is more likely to involve a motor vehicle accident. The deaths of persons over ages of 65 are more likely to engage other factors unrelated to alcohol use. It is also worth noting that older people respond very little to price changes of alcoholic beverages. The net effect of alcohol consumption on mortality rates among older people is slim [9].

  2. 2.

    Revision did not modify the classification used in this paper, and no adjustment was required.

  3. 3.

    Taxes on sprits in percent are extremely high compared to those on wine as explained above.

  4. 4.

    The homicide regression has the only positive coefficient for the cigarette tax with a P-value of 0.591.

  5. 5.

    Let T be tax revenue, t be the tax rate, and X be consumption of beer; Then T = tX. Differentiating T with respect to t and noting that X = X(R), where R = P + t, and P is the price exclusive of tax, yields dT/dt = X + t(dX/dR)dR/dt. Assuming dR/dt = 1 since the supply curve of beer is infinitely elastic, yields dT/dt = X [1 + dx/dR)(R/X)(t/R)]. We can rewrite this as dT/dt = X [1 − (t/R)e], where e is the price elasticity of demand for beer [e = −(dX/dR)(R/X)]. As one can see, dT/dt > 0 if e < R/t. Since R/t > 1, T rises with t even if e > 1 as long as e is smaller than R/t.

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Acknowledgment

We would like to thank Michael Grossman, Naci H. Mocan, and two anonymous referees for helpful comments.

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Correspondence to Kudret Topyan.

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Son, C.H., Topyan, K. The effect of alcoholic beverage excise tax on alcohol-attributable injury mortalities. Eur J Health Econ 12, 103–113 (2011). https://doi.org/10.1007/s10198-010-0231-9

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Keywords

  • Alcohol tax
  • Excise tax
  • Injury death
  • Alcohol consumption
  • Homicide
  • Suicide
  • Falls

JEL Classifications

  • 118