Nothing to Toast in California’s Proposed ‘Dime a Drink’ Tax

False claims about alcohol's costs and lost wages are being used to push tax increases

California’s taxes just aren’t high enough yet. So Assemblyman Jim Beall Jr., D-San Jose, has introduced a bill that would raise alcohol taxes by a dime a drink. The government figures it can raise $1.2 billion a year by taxing every drink you choose to have.

In a press release, Mr. Beall explained why you need to pay more taxes: “The alcohol industry creates devastating problems – traffic accidents, alcoholism – and walks away with money stuffed in its pockets while the public – including nondrinkers – are left to pay billions for the mess.”

And you thought that glass of wine with your dinner wasn’t hurting anybody.

Mr. Beall is parroting the Marin Institute’s deceptive and inaccurate claim that alcohol “costs” California taxpayers $38 billion a year and that high taxes will somehow reduce high-risk alcohol consumption. Let’s look at a few ways the folks at Marin allege alcohol is costing you money.

They contend drinking costs the state “$25.3 billion in lost productivity and reduced earnings.”

That claim, simply, is false. My 2006 Reason Foundation study found that drinkers earn 10 percent to 14 percent more money than nondrinkers. Men who drink socially, visiting a bar at least once a month, bring home an additional 7 percent in pay.

A 2005 study sponsored by the National Institute for Alcoholism and Alcohol Abuse similarly found that drinking actually increased the returns to both education and work experience. And a 2001 study, “The Impact of Problem Drinking on Employment,” found that even “problem drinking is not negatively related to labor supply.”

The Marin Institute says another $8 billion in annual costs to taxpayers stem from alcohol-related crime. Research indicates about one-third of violent crimes involve alcohol. The explicit assumption in blaming these crimes on alcohol is that the offenses would not have occurred without it. There is no proof of that. Just as there is no guarantee that criminals committing violent crimes would be upstanding, law-abiding citizens if they refrained from drinking.

The overwhelming majority of people who consume alcohol do so responsibly. At some point, personal responsibility has to enter the equation and the choices people make have to receive the blame. But alcohol is such a great scapegoat. When former Congressman Mark Foley was caught in a scandal with an underage page, he blamed alcohol and went to rehab. After Mel Gibson went on an anti-Semitic rant and comic Michael Richards had a racist tirade, they blamed booze and entered rehab centers, too.

The Marin Institute’s motives for pushing higher alcohol taxes are clear. Its stated mission is to make “communities free of the alcohol industry’s negative influence.” And on its Web site frets that “67 percent of adults 21 years of age and older in the United States reported drinking alcohol in the past 30 days.”

Funny, I thought adults consuming alcohol was perfectly legal.

Mr. Beall and Marin’s whole strategy of taxing people sober (with the long-term goal of eventually going back to prohibition) is fatally flawed. Consider the group of people they say they are most openly targeting: alcohol abusers and criminals. Research indicates that the heaviest drinkers do not curb their drinking in response to higher prices, unlike light-to-moderate drinkers, for whom there can be positive health benefits. This should not surprise anyone. If alcohol abusers are truly addicted, will an extra “dime a drink” stop them? Will a career criminal decide to not get drunk before his next crime spree because of a 10-cent-per-drink tax? Of course not.

What higher taxes do, however, is infringe upon the rights of the millions of Californians who legally enjoy a margarita with a Mexican dinner, a beer with pizza or a glass of wine in the evening. Millions of moderate drinkers are enjoying themselves responsibly. Is that really a reason to tax them?

Edward Stringham, Ph.D., is an adjunct scholar at Reason Foundation and professor at Trinity College. This column first appeared in the Orange County Register. Stringham’s study on alcohol and earnings is here.