The Association between Tax Structures and the Price Variability of Alcoholic Beverages in the United States

Background: Recent tobacco taxation research suggests that tax structures play an important role in the effectiveness of tax policies in reducing tobacco consumption. However, evidence on tax structures is very scarce for alcoholic beverages. Method: We linked price variability measures for beer, wine, and liquors derived using Economist Intelligence Unit City data for selected US cities from 2001 to 2016 with state tax structures from Alcohol Policy Information System. OLS regressions were performed to assess the association between tax structures and price variability. Findings: Compared to a specific-only tax structure, a mixed alcohol tax structure was associated with a 24-34% (p<0.01) greater beer price variability. Wine tax structures are not significantly associated with price variability. A mixed tax structure for liquor was associated with greater liquor price variability in a bi-variate analysis. Conclusions: Simplifying tax structures to only specific taxes in the US may reduce tax avoidance opportunities and subsequently increase the effectiveness of increasing beer/liquor taxes in curbing excessive drinking.