Use Chemistry to Determine Alcohol Taxes

The one area in which governments receive little resistance when applying taxes is in respect to alcohol and cigarettes. It is almost taken for granted that there is justification for hiking taxes on these two since they are not considered completely essential. In the UK in particular, one of the debates has been on applying taxes to the category of alcoholic beverages known as "alcopops". This is a category of alcoholic beverages that are sometime brightly colored and altered taste but do have a significant alcoholic content. the conventional wisdom is therefore that this leads to the consumption of a higher quantity than would be otherwise consumed.

In this news item, the Conservative Party of the UK is now proposing to raise taxes substantially on this category of alcoholic beverages because they are argued to cause binge drinking. Indeed, the major argument is that this category of beverages are problem drinks and that increased taxation on them would be used to reduce taxes on the others.

Apart from my curiosity about the tag "problem drinks", both parties seem to be unwilling to correctly define the problem. To my mind, the issue is not the consumption per se, but the quantity that are consumed. the appropriate response would be informed by the realization that "alcopops" may merely represent a concentrated form of alcohol. A better way to consider taxation of alcoholic beverages is to calibrate taxes based on the quantity of alcohol by volume irrespective of the name of the product. In that way, there would be no need for the cross-subsidy but all consumers of alcohol would pay taxes in accordance with the quantity of alcohol that they consume as opposed to brands that they chose. After all, inebriation results from the amount of alcohol ingested and not the name.