Study by Harvard Prof Claims Alcohol Taxes Are Insufficient

Taxes on alcohol do not cover the social and economic costs of drinking, according to a Journal of the American Medical Association article co-written by a Kennedy School of Government professor.

MacArthur Professor of Health Policy and Mangagement Joseph P. Newhouse '63 said the report--"The Taxes of Sin: Do Smokers and Drinkers Pay Their Way?"--was aimed at determining if excise taxes on cigarettes and alcohol cover the costs the habits incur for society as a whole.

Newhouse said people who do not smoke or drink often subsidize those who do. He said "external" costs paid by non-smokers or non-drinkers--including collective insurance, pensions, fires, motor vehicle accidents and financial strains on the criminal justice system--exceed the income brought in by excise taxes.

Although alcohol taxes are not currently high enough to "pay" for the costs, cigarette taxes are, the report says.

"The tax should be at least as high as the cost the habit imposes on everyone else," said Newhouse. "Our findings say smokers pay their costs, and drinkers do not," he added.

Not Paying Full Cost

"If you drink and have higher medical costs, you don't pay higher insurance premiums," said Willard G. Manning, a professor of public health and economics at the University of Michigan who also worked on the study.

"They're not paying the full cost of what they're doing," Manning said.

But the study claims that because smokers have a shorter life expectancy than non-smokers, society pays less for smokers' pensions and nursing home subsidies. Nonetheless, the study says, cigarette taxes should be raised to discourage teenagers from smoking.

Curbing Teenage Smoking

"Because over 85 percent of smokers begin smoking before age 20 years, and some evidence suggests that the proportion of those under 20 years of age who smoke is sensitive to taxes, higher taxes may decrease the number of individuals who become addicted," according to the report.

Both Newhouse and Manning said they hoped their study will help in the debate over "sin" taxes, adding that additional taxes on liquor or cigarettes must be implemented on a federal level to prevent interstate bootlegging.