You're Underpaying for All Your Alcohol

The holidays are a prime drink-enjoying season. Whether your preferred poison is mulled wine, eggnog, or an obscure craft beer, alcohol could represent a huge portion of your party budget at any time of the year. Take a moment and appreciate the bill when you're standing at the checkout counter — it turns out we're all paying less for liquor than we should be.

New research published in the Journal of Studies on Alcohol and Drugs has found that state taxes on alcohol have not kept pace with inflation. The facts underpinning this conclusion are a bit convoluted, but basically, breweries and distilleries pay an excise tax when their product is manufactured. That tax is based on a fixed cost per unit volume, without regard for the cost of the raw materials or the product's price point. Further complicating matters is that the unit taxed is the barrel, which is not even standardized within different kinds of beer, much less all drinks in general.

Ultimately, because most states haven't updated their tax structure on alcohol since the early 1990s, manufacturers are underpaying taxes by about 30 percent for beer, 27 percent for wine, and 32 percent for spirits. Those taxes are already built into the costs the customer pays, and that's not even counting resale markups that bars make, which makes them invisible to most drinkers. But in an editorial, the lead researchers suggest that raising this excise tax on manufacturers could "increase state revenues, decrease the consequences of excessive consumption, and reduce the need for health care services," according to a press release.

There's precedent, but it's not popular: A number of so-called "soda taxes" in cities across the U.S. have reduced sugary beverage consumption, but to the tune of unhappy drinkers and angry trade associations. The public health benefits of updating taxation on alcohol could be tremendous. Whether states will take a chance on raising the cost of a drink is another story.