State Alcohol Taxes Creep Up, But Not to Benefit of Treatment and Prevention Programs

At least six states raised taxes on alcohol last year, but it was a glass only half-full for advocates who argue that higher prices lead to less consumption and that alcohol producers should bear part of the societal costs of alcoholism and alcohol-related deaths, injuries, and property damage.

The Marin Institute, a California-based alcohol industry watchdog, recently reported (PDF) that of the 25 states that put alcohol-tax proposals before lawmakers in 2009, six — Illinois, Kentucky, Massachusetts, New Jersey, New York, and North Carolina — successfully passed laws. Marin estimated that the taxes would generate $340 million for the public coffers of these cash-starved states, but lamented the missed opportunities in the others.

Surveys have shown that taxpayers support using alcohol tax revenues to pay for addiction treatment and other related services. However, the laws passed in 2009 largely failed to draw that connection. Measures that would have dedicated a portion of alcohol tax money to treatment and prevention were defeated in Montana, New Hampshire, New Mexico, New York, and Oregon, for example.

Of the bills that passed, the New Jersey bill specifies that $22 million be directed toward a healthcare subsidy fund. Advocates in Massachusetts came closest to winning dedicated funding for treatment and prevention, ultimately securing an informal agreement with lawmakers to hold addiction services harmless from state budget cuts in exchange for support of a successful campaign to end the state's sales-tax exemption for alcoholic beverages.

The outcome was disappointing to advocates who believed the time was right to argue in favor of expanding such taxes. “Given the state of the economy, if ever there was an opportunity to see change, this would be it,” said Michele Simon, research and policy director at Marin.

“The current fiscal crisis has made it easier for advocates to successfully argue for increasing tax revenues, but getting that tax money to pay for treatment and prevention remains difficult,” added Vic DiGravio, president and CEO of the Association for Behavioral Healthcare in Massachusetts.

Laws on the Books

A separate Marin report demonstrates that the idea of linking alcohol taxes and alcohol-related harm is hardly revolutionary; such laws are already on the books in 20 states.

The report (PDF), released in October 2009, found that 12 states use tax money to pay for alcohol-related education or prevention, 7 using such monies to support administration of alcohol-control laws, and 12 directing alcohol taxes to pay for addiction treatment and rehabilitation. Alaska, for example, directs half of its alcohol excise tax revenues to the Alaska Alcohol and Other Drug Abuse Treatment and Prevention Fund, while Idaho directs 20 percent of its beer tax to its Substance Abuse Treatment Fund and Oregon sends half of the excise tax on beer, wine and cider to its Mental Health, Alcoholism and Drug Services Account.

“The idea that states should 'charge for harm' from alcohol sales or consumption is a common practice in the United States, as it is codified and practiced in 20 states,” according to the Marin report.

Nonetheless, getting such laws passed is an uphill struggle against alcohol industry lobbyists and lawmakers who generally are loathe to raise taxes and often chafe at attempts to tie funding to specific needs or interests.

Fortunately for alcohol-tax advocates, blueprints for success not only come from other states where such taxes have been implemented, but also from the (largely victorious) battle to raise tobacco taxes on the state and federal level.

“Ten years ago, everybody said tobacco taxes would never pass,” said David Jernigan, Ph.D., an associate professor at the Johns Hopkins Bloomberg School of Public Health and head of the Center on Alcohol Marketing and Youth. “This is exactly what the alcohol industry fears. We can win these battles.”

Data and organization are the key elements to advocating for higher alcohol taxes, said Jernigan. Earlier this year, for example, the New York Times reported that a review of 110 previously published studies concluded that higher taxes tended to reduce drinking among social drinkers and problem drinkers, teens and adults.

The data linking alcohol to societal costs and harm is “overwhelming,” Jernigan noted, and state-level advocates say that data highlighting the costs of underage drinking and binge drinking can be especially effective in making the case to policymakers and the public.

Smart advocates can also turn the tax argument on its head, suggests Ron Bogle, a former Superior Court judge in North Carolina who last year helped organize a successful drive to raise the state's excise taxes on beer and wine.

“We think the evidence shows that we pay far more in state tax revenues to pay for the harm from alcohol than we collect from alcohol,” said Bogle. “So it becomes an unofficial alcohol tax on all taxpayers, even if you're a nondrinker or a light drinker.”

“Legislators are desperate for money,” said Jernigan. “It's a win-win situation: raise revenues and reduce a public-health problem.”

Organizationally, experience in states like Maryland and Massachusetts show that broad coalitions with dozens or even hundreds of member groups — who nonetheless must speak with a single voice on the issue — are required to overcome the lobbying efforts of a well-funded industry and its legislative allies.

Blunting Industry Arguments

Opponents of raising alcohol taxes say higher prices will cost jobs and cut sales and profits in the middle of a recession, hurting bars, restaurants, liquor stores, and other small businesses. Such arguments are being heard right now in Massachusetts, where the alcohol retailers and producers are trying to restore the sales-tax exemption, and in California, where a 10-cent-per-drink tax proposal strongly backed by Marin went down to defeat in early January.

“It does a lot to have hard data, but we have to have a lot more,” said Bogle. “Legislators are like everyone else: our message is often overwhelmed by the social messaging of the alcohol industry, which spends billions of dollars to get that message out.”

Simon said politicians needed to take a closer look at industry claims and not be swayed by pressure from alcohol lobbyists, and she urged advocates to avoid getting discouraged. “This is a marathon, not a sprint,” she said.

In Massachusetts, where a coalition of 70 organizations rallied around the proposal to end the sales-tax exemption for alcohol, a poll commissioned by the group found that 60 percent of state voters would support the tax if the proceeds went to addiction treatment and prevention. That gave lawmakers a level of comfort with the bill, and the coalition some leverage, said DiGravio.

The tax bill ultimately passed, but with the money going to the general fund rather than the addiction trust fund proposed by advocates. However, backers held enough sway that lawmakers agreed to hold addiction programs harmless from the cuts imposed on nearly every other part of the state budget last year.

“From our perspective they kept faith with our campaign,” said DiGravio.

An incomplete victory, perhaps, but the data showing the link between higher taxes and reduced alcohol consumption suggests that advocates should take a measure of satisfaction that the greater good is being served even when lawmakers do the right thing for reasons that may be tangential to their broader policy goals.

During North Carolina's successful tax-hike campaign, for example, “We had advocates calling from all over the state, contacting all of their legislators,” Bogle said. However, in the end he credited the success of the legislation mostly to the state's economic situation.

“Our advocates don't play at the same level as the alcohol industry,” Bogle said. Nonetheless, he added, “As long as we're silent, the only voice that will be heard is that of the alcohol lobby.”