Author: Charles Frank

The Effects of Prices on Alcohol Use and its Consequences PMC

However, the States’ ability to defend themselves against such legal challenges has been hampered by limited published evidence on the effects of these policies on alcohol prices, consumption, and related consequences of drinking. Several studies have addressed the effects of alcohol prices on the drinking behaviors of youths and young adults. This population is of particular relevance because they exhibit relatively high levels of binge drinking and of alcohol-related problems; moreover, there seems to be great potential for using tax and price policies to prevent underage drinking. Using data from early waves of National Health and Nutrition Examination Surveys, Grossman and colleagues (1987) and Coate and Grossman (1988) were the first to examine the impact of price on alcohol use among adolescents. These investigators found that price increases led to larger reductions in the fractions of heavy and fairly heavy adolescent drinkers than in the fraction of light drinkers.

That aforesaid average binge-drinking episode, however, would call for seven drinks in that episode, which would up the cost to $20.02. These estimates update two previous CDC studies that found excessive drinking cost the U.S. $223.5 billion and cost states and D.C. The researchers believe that the study still underestimates the cost of excessive drinking because information on alcohol is often underreported or unavailable, and the study did not include other costs, such as pain and suffering due to alcohol-related injuries and diseases.

Excessive Drinking is Draining the U.S. Economy

Submit your number and receive a free call today from a treatment provider. If you or a loved one is suffering under the weight of a substance abuse, remember that you are not alone. There are numerous resources designed to help you free yourself and become the person you’ve always wanted to be. They are free and available 24 hours to answer any questions you might have. Your road to treatment of your alcohol problem probably will begin with your primary care doctor, who may be qualified to evaluate your drinking and suggest a treatment plan. If not, your doctor can refer you to an AUD specialist after asking about your drinking habits, giving you a physical exam, running lab tests, and maybe giving you a psychological exam.

Thus, studies that do not separate alcohol-related fatal crashes from non–alcohol-related crashes may come to different conclusions than studies that do make this distinction (Elder et al. 2010; Fell et al. 2009; Miron et al. 2008). Excise taxes create a wedge between the price that producers receive for their products and the final retail price that consumers pay. From a theoretical perspective, increases in excise taxes therefore automatically should lead to increases in the final retail prices of alcoholic beverages. The extent to which changes in excise taxes can be passed on to the final prices is an empirical question. The rates by which tax increases can be passed on to final retail prices (known as the pass-through rates) range from 1.2 to 4.2, depending on specific brands and types of alcoholic beverages analyzed as well as on sales location (i.e., on premises versus off premises). Thus, the limited empirical evidence indicates that increases in alcoholic-beverage excise taxes likely would lead to even larger increases in prices.

Although the findings are mixed about the relative price sensitivity of abusive and nonabusive drinkers, most studies have reported that heavy/frequent drinkers normally are less responsive to price changes than light/infrequent drinkers. A more recent review of 10 studies on the effects of alcohol prices on various measures of alcohol abuse indicated that the average price elasticity was −0.28 (Wagenaar et al. 2009). Binge drinking, which is defined as five or more drinks per occasion for men and four or more per occasion for women, is reportedly responsible for 76% of the economic cost for excessive alcohol consumption in Wisconsin.

How Much Does Alcoholism Cost You?

Most recent research, however, consistently has documented an inverse association between prices (i.e., beer taxes) and traffic fatalities (Elder et al. 2010; Makela and Osterberg 2009; McCarthy 2003; Ponicki et al. 2007; Wagenaar et al. 2010; Young and Bielinska-Kwapisz 2006). For example, using alcohol taxes as instrumental variables to correct measurement errors in price data, Young and Bielinska-Kwapisz (2006) found that higher prices of alcoholic beverages significantly reduced motor-vehicle fatalities. Finally, a meta-analysis of 34 independent estimates also confirmed the statistically significant inverse association (Wagenaar et al. 2010). In recent years, some large alcoholic-beverage retailers have filed a couple of lawsuits against these non–tax-related State regulations over their perceived anticompetitive effects. For example, in Maryland, a large regional retailer has challenged the State’s ban on quantity discounts for wine and spirits at the wholesale level and the related price post-and-hold requirements (TFWS vs. Schaefer et al.) (Chaloupka 2010). In both cases, the States have adopted a defense based on the 21st Amendment to oppose these legal challenges, arguing that the regulations were consistent with the State public health interests by reducing excessive drinking.

1. Likewise, Gallet (2007) showed that among 300 estimates, the median elasticities were −0.36, −0.70, and −0.68 for beer, wine, and spirits, respectively.
2. The majority of the article then focuses on studies investigating the effects of prices (or taxes) on alcohol use and abuse and related adverse consequences (for additional reviews, see Chaloupka 2002; Chaloupka et al. 1998, 2002; Cook and Moore 2000, 2002; Wagenaar et al. 2010).
3. Fatigue, headache, nausea, increased sensitivity to light and sound, vertigo, and irritability often follow the morning after a night of drinking.
4. Researchers compared this with the number of standard drinks consumed in the state and found the average cost per drink to be $2.86.
5. All States impose a tax on beer; in addition, all license States also impose taxes on wine and spirits.3 In general, these State excise taxes are highest for distilled spirits.

If you have private health insurance, the federal Affordable Care Act fortunately requires coverage of substance abuse treatment, just as it does with other health conditions. (Though your deductible or copay may be steep.) Also, Medicare covers “reasonable and necessary” inpatient treatment; Medicaid coverage levels vary by state. This guide addresses the economic cost of alcohol and explores the wider costs of alcohol abuse. You will also learn more about the non-financial costs of alcoholism, and discover how to connect with evidence-based treatment for alcohol use disorder.

How Much Are You Really Spending on Alcohol?

Pogue and Sgontz (1989) showed that the “best-guess” estimate based on their model was 51 percent of the net price of the beverage (i.e., price excluding tax), whereas Kenkel (1996) estimated the optimal tax should be around 106 percent of the net price. Two other studies (Manning et al. 1989; Saffer and Chaloupka 1994) suggested that the excise tax rates during their study period would have had to be doubled to reach the optimal level. Given that State and Federal taxes generally have not kept pace with inflation since these studies were done (see figures 1 and ​and2),2), the “optimal” tax likely would have to be even higher today.

Similarly, indexing alcohol excise taxes to inflation in order to prevent substantial reductions in real tax rates would help ensure that higher taxes have a sustained impact on drinking and its consequences. As the studies presented in this review demonstrate, sizable increases in alcoholic beverage taxes can be a highly effective option for reducing the health, economic, and social consequences of alcohol use and abuse. A large and growing literature has explored the impact of prices of alcoholic beverages on alcohol use and abuse as well as related adverse consequences. The vast majority of these studies provide strong evidence supporting efforts to raise Federal or State taxes to promote public health by reducing drinking, including abusive drinking and its consequences. From a public finance perspective, raising alcohol taxes also is among the most cost-effective instruments to reduce harm and promote public health (Anderson et al. 2009).

The economic costs that result from alcohol use and abuse provide another strong argument for raising excise taxes on alcoholic beverages. In 2006, the Federal Government received about $9.2 billion from alcohol excise taxes, with State governments collecting another $4.9 billion. By comparison, the economic costs of excessive drinking in 2006 were estimated at $223.5 billion (Bouchery et al. 2011). Thus, the economic costs of alcohol far exceed the excise tax revenue from alcoholic beverages. In other words, people who do not use alcohol have been subsidizing alcohol users, especially the top 20 percent of drinkers who consumed approximately 85 percent of all alcoholic beverages (Rogers and Greenfield 1999). For example, Mast and colleagues (1999) replicated the analysis by Chaloupka and colleagues (1993) but used data obtained from 1984 to 1992, rather than from 1982 to 1988.

The average cost of a bottle of wine is anywhere between $10-$35; beer is usually in the range of $6-$20 and depending on the brand, liquor can sell at similar prices to wine. Already, for the casual drinker, the prices slowly add up and can take a decent chunk of your hard-earned cash. For those struggling with alcoholism, the overall costs can become astronomical and crippling in more ways than one. Managing and mitigating addiction is not only detrimental because of the money lost to the substance, but also because of the subliminal funds that can hover just beneath the surface. From medical bills, to various legal fees, to personal opportunity cost, alcohol has so much potential to damage both the wallet and overall wellbeing of an individual.

These inconsistencies regarding the relationship between prices of alcoholic beverages and suicide may result from measurement errors in the dependent variable, because not all suicides were alcohol related. In fact, according to a meta-analysis by Smith and colleagues (1999), blood alcohol concentrations (BACs) indicative of intoxication (BAC more than or equal to 100 mg/dL) were found in a much smaller percentage of suicide cases (i.e., 22.7 percent) than of homicide cases (31.5 percent). In general, a meta-analysis based on 11 independent estimates from four studies indicated that the impact of prices of alcoholic beverages on suicide only was marginally significant (Wagenaar et al. 2010).

If you are concerned about the mounting cost of alcohol abuse in your life, though, consider these illustrations of the direct cost of drinking beer, whether at home or in a bar. In North Carolina, excessive drinking cost residents $9.73 billion in 2017, which worked out to $2.09 per drink based on research from UNC-Chapel Hill. Researchers mostly attributed that leap to an estimated 40% increase in binge drinking during the same time period.