Drug czar proposes ales tax
November 1, 2007
Many college students who have a close relationship with beer could soon see it get more expensive in the future.
Drug czar Gary Kendall, Iowa’s drug policy coordinator, is considering asking the state Legislature for a tax increase on beer.
In a meeting with the citizens of Ankeny last Wednesday, he said funding for state drug prevention and treatment programs has dropped by 50 percent since 2003 and that this would be one way to get money back to those programs.
“It’s supposed to be symbolic,” said Alex Tuckness, associate professor of political science. “Raising prices will lower consumption of one drug while helping to treat and prevent others.”
These kinds of taxes are not unheard of in Iowa.
Last March, the state Legislature created a bill that raised taxes on packs of cigarettes by a dollar a pack. That bill also created a health care trust fund, which would receive the first $127.6 million received from the new taxes each year. The bill was signed into law on March 15.
“The usual argument for taxes like this is that, by definition, alcohol isn’t a necessity item,” Tuckness said. “It’s not like a housing tax. There will always be a tax on disposable income and alcohol is more likely to be taxed. It makes more sense, since consumption can lead to social harms.”
The question becomes this: Will a tax on beer help raise the money for those programs?
“When they raised the tax on cigarettes, the price increased enough that the revenue gathered was less than what was predicted,” said Peter Orazem, professor of economics. “It caused more smokers to drive to Missouri or Nebraska than to buy them here.”
Orazem said there were other, surer ways of getting money for those programs.
“This is a way of justifying raising taxes – as a means to fund these programs. But funding could also come from the general fund. A dollar is a dollar, at some point,” he said.
One thing Kendall hasn’t clarified yet is whether this tax will affect just beer or all types of alcohol. Orazem said taxing just beer shouldn’t be the way to go.
“That would just drive people to other forms of alcohol that have the potential to be much more dangerous. It’s really kind of silly, and if they raise the tax, they should raise it on all substitutes of beer,” he said.
Brad McCartney, freshman in pre-business, believes that, if a tax like this were to be made into law, it would effect the behaviors of some people.
“People who just drink beer because it’s the cheapest alcohol available will stop. People who drink to get drunk, though, they probably wouldn’t be affected as much,” he said.
Tuckness said if people want to fight this tax, they should write to their state representative.
“They want to know the size of their constituency that cares about this issue, so they can craft their reelection strategies around it for their next election. Whether or not they listen depends on how many people contact them about this,” he said.
Orazem said he just wanted the policy coordinator to be honest.
“If he was honest, [Kendall] would probably say that they raised less money from the cigarette tax than they thought they would. The way I see it, they make these sorts of laws where they say the incentive is to lower use, but the real motive is to raise revenues,” he said.