Costs and Benefits of alcohol

If we look carefully through BERL’s numbers, about three quarters of their listed costs fall almost entirely on the drinkers themselves. Heavy drinkers are more likely to be absent from work; their forgone labour income (and income tax revenue for the government) then count as costs. However, heavy drinkers will earn less because they’re less productive: they bear those costs themselves. Heavy drinkers may have some associated health problems. To the extent that government pays for health care, taxpayers bear those costs. But, total excise taxes collected outweigh the health costs to “harmful” drinkers: those health costs are already defrayed by excise taxes on alcohol.

What are we left with after netting out all of the costs that drinkers bear themselves, either directly or via excise taxes on alcohol? Costs on victims of drunk drivers and costs of alcohol-related crime. Those are real external costs of alcohol abuse. It’s important that the Law Commission come up with some real proposals to alleviate these problems. But it’s also important that they weigh up the costs of their proposed solutions on the millions of New Zealanders who reasonably enjoy the moderate consumption of alcohol. Any per unit tax on alcohol aimed at recouping costs generated by a few hoons will always overcharge moderate drinkers while undercharging the folks who generate most of the problems. Geoff Palmer recommends increasing the current tax, but that will only further punish moderate users.

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1 thought on “Costs and Benefits of alcohol”

  1. It's even worse than I'd previously thought. Stay tuned. Net external costs are a much smaller fraction of their reported total than the quarter or so I previously was reckoning.

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