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Alcohol tax equalization and social costs ABSTRACT The
purpose of this paper is to estimate whether alcohol tax
equalization is the optimal policy for reducing
externalities associated with alcohol abuse. Several prior
studies focus on a single alcohol beverage and estimate an
optimal alcohol tax. However, the level of alcohol taxes and
alcohol tax equalization are distinct policy problems. The
question of whether equalization of alcohol beverage taxes
is an optimal policy has never been addressed in prior
studies. This omission may be the result of empirical
problems encountered in estimating the optimal tax
structure. In this paper, a theoretical model of the optimal
tax on all three beverages is developed. This model is used
to simulate the optimal tax on each beverage for a number of
alternative assumptions.
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