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How Efficient are the Current U.S. Beer Taxes?

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  • Vinish SHRESTHA

    (Department of Economics, Towson University, Towson, USA.)

Abstract

This paper examines the status of current beer taxes in the U.S. by questioning how far away the present beer taxes are from the optimal taxes. Following the estimation of tax elasticity, I estimate the lifetime discounted costs that a heavy drinker levies on others through: 1) Years of life lost; 2) Social insurance system; 3) Drunk driving accidents; and 4) Forgone income taxes. The optimal level of beer tax ranges from 17.15 percent to 47.5 percent of the price per drink. Even the conservative estimates suggest that current beer taxes comprise only 16 percent of the external costs.

Suggested Citation

  • Vinish SHRESTHA, 2016. "How Efficient are the Current U.S. Beer Taxes?," Journal of Economics and Political Economy, EconSciences Journals, vol. 3(3), pages 446-470, September.
    • Handle: RePEc:cvv:journ1:v:3:y:2016:i:3:p:446-470
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    Keywords

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    JEL classification:

    • H21 - Public Economics - - Taxation, Subsidies, and Revenue - - - Efficiency; Optimal Taxation
    • H23 - Public Economics - - Taxation, Subsidies, and Revenue - - - Externalities; Redistributive Effects; Environmental Taxes and Subsidies
    • I10 - Health, Education, and Welfare - - Health - - - General

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