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How Efficient are the Current U.S. Beer Taxes?

Vinish Shrestha ()
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Vinish Shrestha: Department of Economics, Towson University

No 2016-09, Working Papers from Towson University, Department of Economics

Abstract: This paper examines the status of current beer taxes in the U.S. by questioning how far away the present beer taxes are from the optimal taxes. Following the estimation of tax elasticity, I estimate the lifetime discounted costs that a heavy drinker levies on others through: 1) Years of life lost; 2) Social insurance system; 3) Drunk driving accidents; and 4) Forgone income taxes. The optimal level of beer tax ranges from 17.15 percent to 47.5 percent of the price per drink. Even the conservative estimates suggest that current beer taxes comprise only 16 percent of the external costs.

Keywords: Externality; Beer Taxation; Efficiency. (search for similar items in EconPapers)
JEL-codes: H21 H23 I10 (search for similar items in EconPapers)
New Economics Papers: this item is included in nep-pbe, nep-pke and nep-pub
Date: 2016-04, Revised 2016-04
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Handle: RePEc:tow:wpaper:2016-09