Employment Impacts of Alcohol Taxes

Background and Aims: Alcohol tax increases are proposed by public health professionals because of their effectiveness in reducing harmful alcohol consumption. Such proposals, however, have been criticized by the alcohol industry for leading to job losses in the economy, although no peer-reviewed study has credibly examined this issue. A comprehensive assessment of the employment impact of alcohol taxes is needed.

Methods: A regional macroeconomic simulation model was used to assess the net vs. gross employment impacts of a 5-cent per drink excise tax and 5-percent sales tax on beer, wine, and spirits while accounting for changes in alcohol demand and substitution and income effects in Arkansas, Florida, Massachusetts, New Mexico, and Wisconsin. Alternative spending of new tax revenue on general revenue and health care sector was also examined.

Results: An additional 5-cent per drink excise tax on alcoholic beverages was estimated to slightly increase overall employment by 801, 4620, 1023, 638, and 1200 in Arkansas, Florida, Massachusetts, New Mexico, and Wisconsin, respectively, while an additional 5-percent sales tax was estimated to slightly increase it by 471, 3032, 651, 397, and 709, respectively, when tax revenue was allocated to general revenue. Allocation to the health care sector will have a similarly positive albeit smaller effect on overall employment. Each increase in employment represented less than 0.1% of total employment in each state.

Conclusions: Alcohol tax increases would not lead to employment losses.