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Optimal Taxation: the Mix of Alcohol and Other Taxes

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  • Larry G. Sgontz

    (University of Iowa)

Abstract

This article compares the effects of two policies aimed at promoting efficiency in the taxation of alcoholic beverages. One policy is to set alcohol tax rates at a level that corrects for excessive social costs of alcohol consumption. The second is to view alcohol taxes as a substitute for other taxes and apply the prescriptions of optimal tax theory to attain the efficient mix of tax revenues. Estimates of the differential effects of the two policies suggest that the second policy requires a higher tax rate on alcohol and produces a greater welfare gain.

Suggested Citation

  • Larry G. Sgontz, 1993. "Optimal Taxation: the Mix of Alcohol and Other Taxes," Public Finance Review, , vol. 21(3), pages 260-275, July.
  • Handle: RePEc:sae:pubfin:v:21:y:1993:i:3:p:260-275
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    Cited by:

    1. Donald A. P. Bundy & Nilanthi de Silva & Susan Horton & Dean T. Jamison & George C. Patton, 2017. "Disease Control Priorities, Third Edition," World Bank Publications, The World Bank, number 28876.
    2. Aronsson, Thomas & Sjögren, Tomas, 2005. "Externalities, Border Trade and Illegal Production: An Optimal Tax Approach to Alcohol Policy," Umeå Economic Studies 654, Umeå University, Department of Economics.
    3. Parry Ian W. H. & West Sarah E & Laxminarayan Ramanan, 2009. "Fiscal and Externality Rationales for Alcohol Policies," The B.E. Journal of Economic Analysis & Policy, De Gruyter, vol. 9(1), pages 1-48, July.
    4. Farrell, Susan & Manning, Willard G. & Finch, Michael D., 2003. "Alcohol dependence and the price of alcoholic beverages," Journal of Health Economics, Elsevier, vol. 22(1), pages 117-147, January.
    5. Parry, Ian W.H. & Laxminarayan, Ramanan & West, Sarah E., 2006. "Fiscal and Externality Rationales for Alcohol Taxes," Discussion Papers dp-06-51, Resources For the Future.

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