Clinton Weighing Hikes in Tobacco and Alcohol Taxes

TOBACCO April 1993

President Bill Clinton is weighing an increase in excise taxes on alcohol and tobacco products as part of his deficit reduction and health care package (Deborah McLellan, "Clinton Said To Be Considering Hikes In Alcohol, Tobacco Taxes," Nation's Health, March 1993, p. 4).

According to figures projected by anti-tobacco and anti-alcohol proponents, a $2 per pack tax hike on cigarettes would raise $35 billion annually and prevent about 2 million premature deaths over time. Increases in alcohol taxes would deter underage drinking. If beer and wine taxes were raised to equal those on liquor, and liquor taxes were adjusted for inflation since 1971, alcohol taxes would raise about $23 billion over five years.

These figures have been disputed, however, by opponents of tax hikes, who point out that health goals and revenue goals are contradictory. The cause of desired health effect -- a major decrease in tobacco and alcohol use -- would be much higher prices due to the higher taxes which would result in lower unit sales. Lower sales could reduce the total amount of tax revenue.