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Sunday, April 21, 2013

U.S. Alcohol Affordability and Real Tax Rates, 1950–2011


The affordability of alcoholic beverages, determined by the relationship of prices to incomes, may be an important factor in relation to heavy drinking, but little is known about how affordability has changed over time.

To calculate real prices and affordability measures for alcoholic beverages in the U.S. over the period from 1950 to 2011.

Affordability is calculated as the percentage of mean disposable income required to purchase 1 drink per day of the cheapest spirits, as well as popular brands of spirits, beer, and wine. Alternative income and price measures also are considered. Analyses were conducted in 2012.

One drink per day of the cheapest brand of spirits required 0.29% of U.S. mean per capita disposable income in 2011 as compared to 1.02% in 1980, 2.24% in 1970, 3.61% in 1960, and 4.46% in 1950. One drink per day of a popular beer required 0.96% of income in 2010 compared to 4.87% in 1950, whereas a low-priced wine in 2011 required 0.36% of income compared to 1.05% in 1978. Reduced real federal and state tax rates were an important source of the declines in real prices.

Alcoholic beverages sold for off-premises consumption are more affordable today than at any time in the past 60 years; dramatic increases in affordability occurred particularly in the 1960s and 1970s. Declines in real prices are a major component of this change. Increases in alcoholic beverage tax rates and/or implementing minimum prices, together with indexing these to inflation could be used to mitigate further declines in real prices.

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