Minnesota’s Economic News – W/E 6/18/21
State and local taxes and spending Minn Post: Latest tax collection report reveals the state of Minnesota is pretty much rolling in cash Bemidji Pioneer: Commentary: State needs to fix…
Minnesota was recently named the sixth drunkest state in America by USA Today. Apparently, 21.1% of Minnesotan adults report binge or heavy drinking, compared to the national share of 18%. And this is a decent earner for the state government. Data from the Tax Foundation shows that Minnesota has the tenth highest beer taxes in America, at 49 cents a gallon.
This is interesting. Here we have some of the highest beer taxes in the United States and some of the heaviest drinking. Wouldn’t we expect the heavy tax on drinking to deter it?
Well, first we need to see if this is a one off. It is common error to extrapolate from one observation, whether its state level data or that guy you know. It is depressing how often some valid finding from social science research is said to be invalidated because somebody knows someone it doesn’t apply to.
Matching the Tax Foundation’s rankings for beer taxation against USA Today’s for boozing gives us Figure 1. We see that, starting on the right with Wyoming (ranks last for beer taxes and 28th for drinking) and moving left towards Tennessee (ranks top for beer taxes and dead last for drinking), increasing beer taxes tends to lead to less drinking. Minnesota, down in the bottom left hand corner, is an outlier.
Figure 1 – Beer taxes and alcohol consumption in the United States
Source: USA Today, the Tax Foundation, Center of the American Experiment
Given the harmful side effects of excessive drinking, this might be a good thing. It might be the policy working exactly as intended. After all, as I’ve written before, much public policy is based on the idea that when we tax something more we get less of that something. Policymakers have no trouble applying this logic to things they wish to discourage, such as drinking and smoking. But we need them to be consistent and apply this logic across the board. Tax beer more and you get less drinking, tax working more and you…can you finish the sentence?
John Phelan is an economist at the Center of the American Experiment.