Chapter 3 Blog

http://edition.cnn.com/2008/HEALTH/11/13/alcohol.tax.deaths/?imw=Y&iref=mpstoryemail
Summary

This recent CNN article reported on the reduction of deaths and diseases due to alchohol after excise taxes were implemented. Statistics show that when Alaska raised its alcohol tax in 1983,deaths caused by or related to alcohol dropped by 29 percent, quite a significant amount. In 2002 an 11 percent reduction was the result of another tax increase. It was clear that raising the tax saved lives because it results in some lower consumption of alcohol. The statistics used in the study were gathered by information from death certificates; Dr. Alexander Wagenaar, a professor at the University of Florida's Department of Epidemiology and Health Policy Research along with the co-authors compiled the number of deaths connected to alcohol such as alcohol poisoning and alcoholic liver disease, and diseases linked to alcohol, such as cirrhosis and chronic pancreatitis. Deaths caused by alcohol-related car accidents or violence were excluded in the study. It is also worth noting that researchers in Finland have found similiar results. When the government of Finland lowered the tax on alcohol in 2004 to protect domestic sales, the number of arrests on intoxicated individuals increased by 11 percent. Of course, the American alcohol industry opposes the excise taxes because they claim that they would only prevent the responsible consumers rather than the abusers of alcohol from purchasing products. Another argument that was made was that taxing alcohol would have negative imapct on the economy because of diminshing returns for the government.

Connections to Chapter 3
The component in this chapter was the role of the government in a market economy. In the situation above the government levied an excise tax on the alcohol industry in Alaska in order to curb alcohol use. The excise tax increases the price of alcohol which shifts the supply curve upwards. This also lowers the demand for the product by increasing the incidence tax depending on its elasticity. The question of whether alcohol is an inelastic or elastic good is dependant on whether the consumer is heavy drinker( making it inelastic) or one who enjoys wine or spirits and only drinks occasionally (which would make it elastic). The article seems to contradict the idea in the chapter that the imposition of an excise tax on alcohol (which according to the text is an inelastic product) will generate revenue for the government because of its inelasticity.This however is not the case since the number deaths/diseases due to alcohol has declined and one can infer that this is the result of a decline in demand. Another connection to the chapterthat can be made would be positive third party effects. The less people consuming heavy amounts of alcohol, the less potential there is of an alcohol related death or accident among the population.

Personal Reflection
An excise tax can reduce alcohol consumption as shown in the study, but I believe that prevention programs and education are the best solutions to this constant problem in society. Taxes on alcohol cannot truly diminish the problems since it is considered an inelastic good along with tobacco. A higher tax on alcohol might also be needed to offset the inflation the economy is experiencing. I agree that a excise tax would affect the demand of those who drink responsibly but will not affect the heavy drinkers whom the government should focus on helping. Overall it is good to see that taxes on alcohol have had significant benefits in Alaska. A similiar policy should be replicated for other products that can to be harmful to the population and environment e.g: tobacco,automoblie air conditioners and carbon dioxide producing items.