To cut wasteful spending, promote health and finance health-care reform, President Clinton ought to start taxing the booze industry, not subsidizing it.
Beer, wine, and liquor producers spend more than $1 billion annually on advertising and millions more on auto races, "spring break" parties for college students and other sales ploys. Companies pay no income tax on that, thereby reaping at least a $300-million-a-year tax break. Taxpayers are subsidizing promotion of products that kill 100,000 Americans annually.
In addition, businesses buy billions of dollars worth of booze a year, and government loses out on up to $2 billion in income tax. That's because businesses purchasing booze for gifts or three-martini lunches write off 80% of the cost as an ordinary expense. The tax code makes it more attractive for companies to invest in booze than in capital equipment.
The government also gives taxpayer money directly to companies. The Market Promotion Program has paid companies more than $60 million since 1986 to encourage foreigners to drink American products. In 1991, for example, Jim Beam Brands and others shared a $3.1 million gift to Kentucky distillers. E&J Gallo got $5.4 million of the $10 million given to California wineries.
The insanity of subsidizing booze merchants is obvious when you consider two other statistics: Alcohol problems cost Americans about $100 billion annually for medical care, lost productivity and other matters. And, cities, states and the federal government receive only about $20 billion in sales and excise taxes on booze.
Society could recover more of the costs that alcohol imposes simply by raising excise taxes. Policy-makers ought to heed the advice of former Surgeon General C. Everett Koop's Workshop on Drunk Driving, which recommended adjusting tax rates for inflation since 1970, then boosting beer and wine rates to equal liquor's. Those increases would cut consumption by about 10% and prevent thousands of deaths. They would also generate $117 billion in new revenues over five years.
Higher alcohol taxes would cost most Americans--who drink only moderately--just pennies a week. But the higher taxes would cause the 5% of adults who drink heavily to truly "think before they drink."
Low-income drinkers would contribute only a small proportion of the new revenues, yet they would get back most of the benefits in the form of decreased crime and greater access to health care.
If the federal government ended all the subsidies to the booze industry and raised excise taxes, industry's profits would decline, but, happily, only in proportion to the decline in alcohol problems.