District of Columbia:

Taxes and Other Strategies to Reduce Alcohol Abuse

GGD/HEHS-98-140: Published: May 19, 1998. Publicly Released: May 19, 1998.

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Pursuant to a legislative requirement, GAO examined issues relating to the taxation and regulation of alcoholic beverages in the District of Columbia, focusing on: (1) a comparison of the District's alcohol taxes with surrounding jurisdictions; (2) whether those taxes could be set closer to surrounding jurisdictions; (3) how much higher the alcohol tax would be if it had been indexed for inflation; (4) which states earmark alcohol taxes for specific purposes; (5) whether raising alcohol taxes will reduce abuse; and (6) the characteristics of effective alcohol prevention programs.

GAO noted that: (1) compared to taxes levied in nearby jurisdictions, the District's combined tax rates are higher because its sales tax is among the highest; (2) the District cannot conform its alcohol tax structure to match those in surrounding jurisdictions because tax structures among neighboring jurisdictions differ significantly; (3) the District's per-unit excise tax rates have declined in inflation-adjusted terms since they were last changed, and special sales tax rates on all alcoholic beverages have compensated for the lack of indexation of the excise tax rates, these taxes will continue to decline gradually in inflation-adjusted terms; (4) economic theory and empirical evidence indicates that increases in the District's alcohol taxes are likely to reduce alcohol use, especially among youths; (5) at least 24 states have earmarked at least a portion of their alcohol excise tax revenues for specific purposes; and (6) best current evidence suggests that several legal and regulatory strategies, along with visible enforcement with education about these laws, can reduce illegal drinking and alcohol-related problems in the District of Columbia.

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