Sin Taxes on Alcohol Beverages: What You Need to Know

“Sin taxes on alcohol beverages.” Perhaps that phrase is a justification for raising them. The news is full of debates about increasing so-called sin taxes.

But what’s sinful about alcohol? Absolutely nothing. Saint Thomas Aquinas said that no substance is sinful, “but only the misuse of it that makes it so.”

Drinking in Moderation is Healthful

Drinking beer, spirits (liquor) and wine in moderation is linked with better health and longer life. That’s compared to not drinking or drinking heavily.

Perhaps abstaining from alcohol or abusing it might be considered unhealthful. Abstaining from alcohol a health risk as is abusing it. But few would consider such actions sinful.

Raising taxes on alcohol doesn’t reduce its abuse. Nor does it reduce underage drinking. Underage drinkers generally get most of their supply from others. So they don’t pay for it. Research repeatedly shows this.

Tax Differences

Differences in alcohol taxes between states or localities often lead consumers to cross state or county lines. This benefits those places with lower taxes. Also, people often buy other things. This magnifies the economic benefits to lower tax areas.

People in dry areas can drink alcohol if they wish. They simply can’t legally buy it in such places. So the question for voters in dry areas isn’t whether or not people will drink there. Instead, it’s who will get the profits, employment, taxes and other economic benefits.

In dry counties alcohol related traffic crashes are higher. So they subject their residents to needless injury and death. Yet get no economic benefits of being wet.

Jackson County in Alabama remains dry. But three of its cities permit alcohol sales under the state’s local option law. Then the county decided to tax alcohol sales within the three wet cities. But the Alabama Attorney General ruled that only wet counties can tax alcohol sales. By remaining dry, the county must forego the economic benefits of the alcohol sales.

Just as the entire nation learned during National Prohibition, being dry comes at a very high price.

At the extreme are places that don’t sell alcohol at any price. That is, areas of prohibition. This leads to the existence of oases because they sell (or sold) alcohol. For instance, South of the Border in South Carolina. Or Impact, Texas. Or White Clay, Nebraska.

Effects of Tax Differences

Imagine shopping for alcohol in a store, unaware that The State Police are secretly spying on you. So you pay for your purchases and leave. But as you cross the border going home, the Police bust you. You may avoid jail, but your purchases are taken and you feel violated.

You were shopping in a state store in Russia. And you returned home to Belarus? Not exactly. You are a resident of Pennsylvania who was taking advantage of the lower prices, better selection, and better service. These are all available in neighboring states.

However, the Pennsylvania Liquor Control Board doesn’t want residents to escape its monopoly and enjoy the fruits of competition.

Monopoly

All alcohol in Pennsylvania must by law be bought from the state’s monopoly stores. They’re operated by the state’s Liquor Control Board. But many customers describe them as similar to a state store in the former Soviet Union. They have high prices, poor selection, and indifferent clerks. Also, there’s an onerous 24% state tax on top of federal and other taxes.

Customers are often near states with no monopoly. So they find better selection and service plus lower taxes in bordering states.

The state monopoly doesn’t like this “border bleed.” And monopolies abhor the idea of competition. That’s why the Control Board tries to control residents by spying on them and intimidating them.

Perhaps the Liquor Control Board thinks it’s protecting and serving Pennsylvanians. But many residents don’t seem to agree.

Regressive Taxes

Alcohol taxes are regressive. That is, they fall most heavily on those who are least able to afford them. Thus, they’re both unfair and unjust.

First, alcohol taxes take a larger proportion of a low income than of a high income.

Second, alcohol taxes are more properly referred to as hospitality taxes. That’s because they tend to harm lower-income hospitality workers. It is largely these relatively powerless laborers who are victimized by loss of income and even jobs loss.

So perhaps we should call alcohol taxes regressive, anti-worker taxes. That’s clearly more accurate than “sin taxes.”