What Alcohol Taxes Have to Do With Climate-Change Policy

The Atlantic

What Alcohol Taxes Have to Do With Climate-Change Policy

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And what they have to do with climate change. This is an excerpt from The Atlantic s climate newsletter, The Weekly Planet. Subscribe today . The climate scientist Ken Caldeira recently tweeted a joke meant to charm carbon-tax advocates. If we don't want people to drink so much alcohol, rather than taxing alcohol, we can subsidize everything that is not alcohol, he wrote . His point, if I may ruin the punch line, is that the United States approach to combatting climate change is kind of silly. It relies far more on subsidizing renewables and other zero-carbon sources than on penalizing fossil fuels, which is what we really care about in the first place. We should just tax carbon pollution . I think this comparisonbetween carbon taxes and alcohol taxesis a surprisingly instructive one. Thats because, to start, alcohol taxes work . Fifty years of studies show that as the price of alcohol increases, the societal problems associated with alcohol decrease. But its also instructive because, well, consider the history of alcohol taxes. The first time that Congress tried raising taxes on alcohol, Americans staged a violent insurrection that had to be forcibly subdued by, literally, George Washington. When carbon-tax advocates point to the history of alcohol taxes, I do not think that this is the anecdote they have in mind. Yet its worth sitting with this history for a moment and seeing what we can learn for climate policy. In 1791, Alexander Hamilton, the Treasury secretary, advised Washington and Congress to pass an excise tax on distilled spirits. Hamiltons goals were more modest than those of modern carbon-tax advocates: He didnt want to reduce booze consumption at all; he just needed an easy source of revenue to pay off the countrys Revolutionary War debts. The tax seemed popular at first with business and financial elites. But by 1794, it was violently opposed by small commodity producers, especially in western Pennsylvaniadoesnt that sound familiar? who distilled their own spirits at home and relied on the growing whiskey business for their livelihood. When more than 400 men attacked the home of a tax collector, something had to be done. Washington rode in with 13,000 men and peaceably put down the rebellion. The political repercussions continued, however. The backlash helped spark the formation of the Democratic-Republican Party and, with it, the first U.S. party system. The tax remained unpopular until 1802, when President Thomas Jefferson repealed it. Alcohol was arguably as essential to the early American republic as fossil fuels are to our way of life today. In the 1790s, the average American adult drank the equivalent of more than five gallons of 200-proof alcohol a year. Whiskey was used as a medium of exchange in the frontier. By 1830, the average American adult drank the equivalent of seven gallons of 200-proof alcohol annually. Seven gallons. That was as high as consumption ever gotbut what reduced alcohols use was not a tax. It was economic expansion paired with a social movement. A new religious crusade, the temperance movement, stigmatized alcohol consumption and public drunkenness, framing them as sins. You could say [the temperance movement is] the practice-round for nearly every other activist movement that would follow in American history, Jon Grinspan, a curator at the National Museum of American History, told me in an email. Americans also started substituting one licit drug for another: From the 1820s to the 1850s, tea and coffee consumption more than doubled. What followed was a historic drop in booze consumption. By the 1850s, the average American adult drank less than two gallons a year. When the Civil War broke out a decade later, Congress desperately needed revenue and passed a new excise tax on alcohol. (It helped that many of the same religious moralists who had led the temperance movement now participated in the antislavery Republican Party.) As the war ended, the tax remainedand became essential. By the turn of the 20th century, the alcohol tax generated more than 30 percent of federal revenues every year. (In 1913, when Congress imposed the modern income tax, its share fell to 10 percent .) Read: America has a drinking problem This history is important, I think, because it shows that even in a case where America implemented an economically rational policy, we didnt adopt it by a particularly rational process. In 1790, the government could not impose an alcohol tax without facing rebellion; by 1890, the government depended on an alcohol tax for a large share of its revenues. The politics that made that change possible stemmed from, first, a campaign led by one of the countrys earliest activist movements and, second, the greater availability of alcohol substitutes such as coffee and tea. Even then, temperance activists later tried to pass their favored policy, a supply-side ban on the production, transportation, and sale of alcohol that we call Prohibition. These two preconditions seem more important when considered for fossil fuels, which furnish most primary energy in our industrial society. The U.S. might one day adopt a carbon tax. But cheap substitutes to fossil fuels seem likely to come firstand a policy that focuses on securing them as options shouldnt be rejected on the merits.