9. Funding

All projects recommended herein should be adequately funded. All possible revenue sources and methods to raise such funds for such purposes should be explored.

The Advisory Commission believes that a variety of funding sources should be explored to provide alcohol and drug treatment for young people. The source of funding that was explored in detail by the Commission was the increase in taxes on alcoholic beverages. Numerous studies have now demonstrated that the effective tax rates on alcoholic beverages have not kept pace with inflation since 1953 as compared to the costs of other goods and services.232 The result, according to testimony before the Advisory Commission, is that in some areas, beer is price-competitive with soft drinks.233

The increased taxes may also impact on the demonstrated elasticity of demand for some alcohol products, by lowering consumption of beer, for example, particularly by the young for whom beer is the alcohol beverage of choice.234 The impact of such taxes seems also to be on consumption across the range from heavy to light drinkers, thus answeringg criticisms that only marginal consumers would be affected 235 Finally, the essential regressivity of alcohol taxation can also be readily defended because of the tremendous social cost imposed by alcohol abuse on the rest of society.236

In addition, it is also clear that the current levels of alcohol taxes often vary according to the type of beverage without any rational relationship to the relative alcohol content.237 This disparity in taxation of alcohol content further distorts price competition between beer, wine and distilled spirits. It also results in making beer cheaper than its actual alcohol content would dictate if taxes were made more uniform or "equalized" based on alcohol content as some have proposed.238

The primary concern expressed by many parent groups, treatment personnel and other witnesses at the Advisory Commission field hearings was the need for new sources of fundin for treatment facilities for young alcohol and other drug abusers.'9 It seems clear that an observable inequity in alcohol taxation and a need for treatment facilities should be paired as a classic, matched "source" and "use" of funds.240

One example of this "dedicated" tax is currently being proposed in Michigan pursuant to the Petition Initiative on the ballot submitted in 1984 by the Michigan Citizens for Substance Abuse. The proposed Amendment to the Michigan State Constitution reads as follows:

Twenty five percent of all revenues generated for the state of Michigan from excise taxes, sale, manufacture, or distribution of alcoholic beverages shall be allocated for community-based alcohol and drug abuse treatment and prevention programs. These revenues shall not be used for state administration of substance abuse programs, nor to supplant existing federal, state and local funding, nor infringe upon those recipients specifically funded by alcohol revenues 10 percent of these revenues generated for substance abuse programming shall be allocated for primary and secondary school-based prevention/educational services. Further, said excise taxes from date of implementation shall not be increased without the consent of a majority of Michigan's electorate so voting.

At this time, the initiative does not provide for any increase in the excise tax levels; however, this is reportedly due to that state's depressed economy.

Dedication of tax revenues has been traditional in other areas, particularly bond issues relating to public projects involving construction of public buildings, including health care facilities. The following thirteen states to date have dedicated alcohol excise taxes: Maine, Maryland, Mississippi, Nevada, North Carolina, Oregon, South Carolina, South Dakota, Tennessee, Utah, Vermont, Virginia and West Virginia.241

There are other sound fiscal, economic and public health bases for raising the historically low alcohol taxes to fund prevention and treatment. First, the increased revenues could be a major funding source in times of tight budgets for government at all levels. As one Advisory Commission witness stated: "The state of California, for example, has lost an estimated $188,702,700 since 1960 by not having the state (alcohol) tax indexed to inflation."242

For all of these reasons, it seems practical both to equalize and increase alcohol excise taxes and to dedicate the increased revenue at least in part, to alcoholism prevention and treatment. Therefore, this recommendation urges the states to support increased federal and state alcohol taxes and to allocate significant portions of the increase in tax revenues to supplement prevention, intervention, treatment and research for youth with alcohol problems.

230 Presidential Commission on Drunk Driving, supra note 74, at 11. The Commission's Dram Shop Recommendation states:
States should enact "dram shop" laws establishing liability against any person who sells or serves alcoholic beverages to an individual who is visibly intoxicated.

231 48 Fed. Reg. 5545 (1985)•

232 See, e.g., Mosher and Beauchamp, Justifying Alcohol Taxes to Public Officials, J. Pub. Health Poly, 422 (Dec. 1983).

233Id. at 435. See also testimony of James F. Mosher, Los Angeles. San Diego Dept. of. Health Services, Alcohol Taxes: A Rethinking of Their Relationship to Prevention of Alcohol Problems, 30, Table XVII (Jan., 1984).

234See Cook, The Effect of Liquor Taxes on Drinking, Cirrhosis and Auto Accidents in Alcohol and Public Policy: Beyond the Shadow of  Prohibition at 255 (Moore and Gerstein Eds., 1981). See also Cook, The Economics of Alcohol Consumption and Abuse, in Alcoholism and  Related Problems; Issue for the American Public at 67 (Prentice Hall, 1984)(regarding the effect of alcohol taxes on consumption). Equalizing taxes by alcohol content may also interfere with a youth's ability to purchase beer, their beverage of choice, by raising the price beyond their means. See Mosher and Beauchamp, supra note 233 at 435. See also Wallack, The Prevention of Alcohol-Related Problems: Recommendation for Public Policy Initiatives at 3, 14 (July 1984).

235Grossman, Coate and Arluck, Price Sensitivity of Alcoholic Beverages in the United States, 8 (Sept. 1984). There also seems to be little cross-elasticity of demand between beverages. Id. at 31.

236íd. at 35.

237Mosher and Beauchamp, supra note 233 at 435.

238Id. at 438. The authors note their particular concerns about this price anomaly especially because of the popularity of beer to youth.

239See, e.g., testimony of Richard Russo, Princeton.

240At least one commentator has referred to the dedicated alcohol tax as a "sin-tax." Sloan, Small Business Angle: Medicare Reform - A Matter of Sin Tax (1985). Recently, the National Federation of Independent Business supported the dedication of the alcohol tax because of alcohol's contribution to the medicare debt. Id.

241See National Association of State Alcohol and Drug Abuse Directors, State Survey Fact Sheet, Dedicated Alcohol Taxes  (1982). See generally Estes and Heinemann, Alcoholism, Development, Consequences, and Intervention at 86 (2nd ed. 1982)(regarding dedicated taxes for prevention programs). See also Mosher and Beauchamp, supra note 233, at 436-7. Fein, supra note 187; and Cook, supra note 235.

242See testimony of James F. Mosher, Los Angeles. See also San Diego Dept. of Health Services, supra note 234, at 7.