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Demon Drink
The Alcohol Industry Needs Alcoholism to Thrive

The alcohol industry makes its money off the backs of addicts, and higher alcohol taxes could help. That’s the takeaway from a recent segment on MSNBC’s show All In With Chris Hayes. Hayes’s guest was Dr. Phillip Cook, a professor of public policy at Duke’s Sanford School of Public Policy and an expert on American alcohol policy. Cook wrote a book in 2007 on American alcohol consumption, Paying the Tab, which belatedly began to  make the rounds on the web this week thanks to a piece highlighing his research in the Washington Post‘s Wonkblog.

The piece notes that 30 percent of Americans don’t drink at all, while another 30 percent drink, on average, less than one drink per week. Thus only 40 percent of the American population really supports the alcohol industry. But within that 40 percent, it’s actually the top 10 percent of regular drinkers—those who consume on average ten drinks per day—that makes the most difference:

If you consume 10+ drinks per day, for instance, you almost certainly have a drinking problem. But the beverage industry is heavily dependent on you for their profits.

“One consequence is that the heaviest drinkers are of greatly disproportionate importance to the sales and profitability of the alcoholic-beverage industry,” he writes writes. “If the top decile somehow could be induced to curb their consumption level to that of the next lower group (the ninth decile), then total ethanol sales would fall by 60 percent.”

As Cook points out in the segment, this dynamic characterizes most industries, where 20 percent of the customers make up 80 percent of sales. But the medical, relational, and societal costs of that distribution for alcohol consumption are obviously much greater and more grave than for other industries. And it’s not just alcohol, either—the first report on marijuana use to come out of Colorado’s new pot paradise shows the same pattern of a minority of heavier uses far outstripping profits generated by casual use. 

In the segment, Cook explicitly makes the case that these numbers mean we should raise alcohol taxes, and we agree that this seems like a good idea. Historically, excise taxes on alcohol were a mainstay of federal budget, so much so that the income tax amendment was passed to clear the way for Prohibition. Without the income tax, prohibition was fiscally impossible. Higher taxes would also put a dent into at least some of the heavy use Cook identifies. Call it “Prohibition Lite,” which we’ve previously discussed here, pivoting off a column by Reihan Salam that advocated for higher excise taxes. (From the American Interest archives, Mark Kleiman is also worth reading on this). 

For all drugs, legalization helps ameliorate some societal problems—and for that reason we support winding down the drug war. But legalization also brings many costs of its own. With all drugs, including alcohol, the users should pay as much of the full social cost of the drug as possible. Drinking or drugging responsibly has a social meaning as well as an individual one. It means both paying the true social cost of the freedom that lets you partake of your favorite mood enhancer as well as being moderate and limited in your personal use.

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  • Andrew Allison

    There’s something to be said for “sin” taxes as long as the proceeds are, in fact, used to ameliorate the social costs of the sinful pleasures (fat chance!). But if social costs are really the issue, shouldn’t we be taxing the consumption of sugar, saturated and trans fats, etc.? The social costs of excess weight are also very high.
    Incidentally, the proposition that a nice round 30% don’t drink and an equally rotund 30% drink less than once a week and 10% an average of 10 a day is questionable. Not only are the numbers suspect, but if there’s a subject about which people would lie, alcohol consumption is it.

  • vepxistqaosani

    Sounds like I’d better get to work on my new book: How to Distill Spirits at Home.

  • TheRandomTexan

    “If the top decile somehow could be induced to curb their consumption
    level to that of the next lower group (the ninth decile), then total
    ethanol sales would fall by 60 percent.”

    How about if the whiny teetotalling bottom 60% got off their couches and started picking up the slack? The country doesn’t need another PhD thumbsucker cooking up more taxes that he somehow avoids paying. Dr Cook needs to chill out with a double martini after work, and back off on the utopian ideas. Never trust a man you can’t get drunk with.

    • FriendlyGoat

      Odd statement coming from a Texan. Your main man, George W. Bush, stopped drinking decades ago. He might have qualified under that goofy standard of being a candidate “you’d rather have a beer with”, except that he had no intention of having a beer with you.

  • Rick Johnson

    What a load of crap!

    The alcohol industry can’t force anyone to bu a drink. That the heaviest users of a product contribute the most to the suppliers profits is way to obvious a point to be worth making, unless you are seeking to blame the industry for the choices made by its customers.

    Also, name one study that has shown that increasing taxes on alcohol has had a significant impact on its consumption. This is just a tax gab dressed up as being ‘socially responsible’.

  • FriendlyGoat

    Some people think we should increase taxes on alcohol, tobacco, casino gambling, lottery games and marijuana so that we can reduce income taxes. They might even like legalized prostitution if regulated with taxation.

    I tend to believe the reverse of all of this. Government should not be profiting from industries it would criticize mob bosses for profiting from. It’s civic immorality to do this. Secondly, the “sin” taxes tend to fall most heavily on the lower economic classes. Thirdly, the LAST thing we need to do is find ways to further reduce the positive effects of mankind’s greatest social invention—-the high-end income tax.
    Fourthly, taxes on the “sin” items have only a very marginal effect on reducing consumption, anyway. (You mostly just make drinkers’ families poorer.)

    I certainly WOULD agree, however, with any reader at TAI (if any can be found) that John and Cindy McCain should not have been elected to The White House because their Hensley & Company beer distributorship was profiting from the wake of destruction left behind the HEAVY drinkers in their southwestern territory.

    • Josephbleau

      So you agree that John Kerry should have never run for president because catsup makes people fat! (Ah Haaa) People can invest in what is legal. Any other standard is ridiculous. If you want to make booze or investing in oil or Israel a crime pass a law. I love knee jerk partisan assault.

      • FriendlyGoat

        The Republican party is full of church people. The notion that virtually none of them were bothered by their presidential candidates,the McCains. profiting from addiction, domestic abuse, child neglect, alcoholic job loss and drunk driving is, to me, the most astonishing scandal of 2008. But you’re far from the first person who has called me silly for pointing this out.

        I personally think it’s just one more symptom of politics having already ruined most of the churches.

  • vepxistqaosani

    Back in the USSR in the 80’s, I was invited out on a Russian weekend. After I found out what it was, I cravenly declined.

    One drinks 200 ml of vodka on Friday night, 50 ml upon arising Saturday, and 50 ml every time the buzz begins to wear off until Monday morning, when one goes to work. (I was told never to buy a pair of shoes that was manufactured on a Monday.)

    I don’t think that even those extreme drinkers would get to 10 drinks (500 ml — half a litre) a day.

    So I’m calling BS on the assertion that 4% of Americans — 12 million people — daily outdrink the Russians.

    Perhaps the good Dr. Cook is cooking the books by redefining a ‘drink’ as the amount of alcohol in a 3.2 beer (3/8th of an ounce).

  • Ofer Imanuel

    If we only could effectively make higher sin taxes work, this would have been an excellent idea.
    Problem with the sin taxes (that includes tobacco) is that when they are too high, we get a black market and crime.

  • Dan

    so if they are going to increase the alcohol tax that means they will decrease income taxes right? RIGHT?!?

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