Impact of Ideology on State Excise Taxes for Alcohol

Written by: Karl Schneider

Primary Source:  Michigan Policy Wonk Blog, April 6, 2017

In addition to sales tax, products like alcohol, tobacco, and motor fuel can be taxed by state governments as an additional source of revenue. Alcohol is typically divided into subcategories for the purpose of taxation: spirits, wine, and alcohol. This blog post will attempt to understand if ideology has any impact on taxes of these three categories of alcohol, specifically if states of certain ideologies are more likely to tax one alcohol rather than the other. The data utilized on alcohol excise taxes was derived from the Tax Foundation website, and this post used the 2011 data, corresponding with the year of the most recent state ideology update from Erikson. The state ideology measure ranges from .370 for the most liberal (District of Columbia) to the most conservative with -.529 (Wyoming). This project used three simple regressions, with the alcohol tax as the dependent variable, and ideology measure as the independent variable.

 

 

(1)

(2)

(3)

VARIABLES

Wine Tax

Beer Tax

Spirits Tax

 

ideo

-0.514

-0.491**

-0.832

 

(0.515)

(0.231)

(5.030)

Constant

0.659***

0.209***

6.231***

 

(0.119)

(0.0532)

(1.158)

 

Observations

51

51

51

R-squared

0.020

0.085

0.001

Standard errors in parentheses

*** p<0.01, ** p<0.05, * p<0.1

 

The three regressions show  that while ideology was not a statistically significant predictor for either wine or spirits taxes, it was for beer taxes at a 5% level. Specifically, conservative states are more likely to have higher per gallon state excise states according to this study. A possible explanation for this data is that more conservative states are more likely to impose taxes to discourage drinking, specifically for the Bible Belt states, as hypothesized by Brunori, 2015. These higher taxes for Southern states do not correspond with the higher levels of binge drinking, as according to the CDC the highest category states are exclusively clustered in Northern states, with the exception of Alaska and Hawaii (CDC, 2015). More research is needed for potential explanations for this difference is excise tax rates.

 

Sources:

“Alcohol Taxes.” Center for State Tax Policy, Tax Foundation. Google. Accessed 2 Apr. 2017.

Brunori, David. “Taxing Beer.” Forbes Magazine, 13 Aug. 2015. Google. Accessed 2 Apr. 2017.

Erikson, Robert S., Gerald C. Wright, and John P. McIver. Statehouse Democracy: Public Opinion, and Policy in the American States. Cambridge University Press, 1993

Jordan, Marty P. and Matt Grossmann. 2016. The Correlates of State Policy Project v.1.7. East Lansing, MI: Institute for Public Policy and Social Research (IPPSR).

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Karl Schneider
Karl Schneider is an undergraduate student studying International Relations and Economics. He has worked on energy and environmental research sponsored by Penn State University and the National Science Foundation. Karl is also a State Policy Fellow at IPPSR, where he is working on the Correlates of State Policy Project, the State of State Survey, and the 2016 Election.