There’s a neat little paper from the Congressional Research Service (“RS20172: Excise Taxes on Alcohol, Tobacco, and Gasoline: History and Inflation-Adjusted Rates“) that shows what the taxes on alcoholic drinks would be in the U.S. had we kept the 1951 rate adjusted for inflation. For example, beer was originally taxed in 1951 at $9 per barrel and was taxed at $18 per barrel in 1999 (federal taxes only). If the US Congress had written an inflation-adjusted tax, it should have been $55.88 per barrel in 1999.
I’ve attached the full table below. It’s interesting reading.
If we reduce alcohol consumption, we can reduce a lot of health costs associated with alcoholism. Higher taxes would probably lead to reduced intake.
However, we should be aware of unintended consequences: if we make alcohol out of the reach of the poor, will they simply turn to other, now cheaper narcotics? And what would happen to all that tax revenue if people stopped drinking? That was one of the most worrying problems of Prohibition.
Unintended consequences are always what gets you.
Table 2. Comparison of 1951 and 1999 Statutory Rates and Inflation Adjusted Excise Tax Rates
| Commodity | Statutory Rate November 1951 | Statutory Rate January 1999 | Rate if Adjusted for Inflation Occurring Nov. 1951 to Dec. 1998 |
| Distilled Spirits (per proof gallon) | $10.50 | $13.50 | $65.19 |
| Beer (per barrel) | $9.00 | $18.00 | $55.88 |
| Still Wine–Less than 14% alcohol content (per wine gallon) | $0.17 | $1.07 | $1.06 |
| Still Wine–14-21% alcohol content (per wine gallon) | $0.67 | $1.57 | $4.16 |
| Still Wine–21-24% alcohol content (per wine gallon) | $2.25 | $3.15 | $13.97 |
| Champagne and Sparkling Wine (per wine gallon) |
$2.72 | $3.40 | $16.89 |
Note: The Inflation adjustment was made using the Consumer Price Index for All Urban Consumers (CPI-U) for November 1951 and December 1998.
Image Credit: The bar at Crow Bar. © 2012 Jack Newton (CC BY-SA 2.0). Via flickr.