Discuss economic arguments for and against imposing substantially

822 Words2 Pages
bulb-icon

Recommended: Government intervention into free markets

Discuss economic arguments for and against imposing substantially

higher taxes on sale of alcohol.

Governments interfere in markets and their working with the primary

purpose of provision of welfare to people and preventing market

failure.

There are many methods of intervention such as

- taxes and subsidies

- buffer stocks

- applying maximum and minimum prices

- provision of public goods and services

- provision of education and training

- legislation and market reforms

Applying taxes has two purposes: to generate revenue for the

government and to discourage consumption and output of certain goods,

usually demerit goods.

Demerit goods are those goods that are usually over consumed by in a

market system, and have social costs exceeding social benefit due to

high negative externalities. They contrast merit goods which are

desirable for the welfare of society, as positive externalities exceed

negative externalities.

Taxes out on goods such as alcohol are considered indirect taxes.

Depending upon the price elasticity of a good, and its demand and

market price, government places either

- specific taxes that are of a specific number, e.g. 10 dirhams on

every bottle of beer

- ad valorem taxes that add a percentage of the market price onto

taxes e.g. 5% of price of beer

A government must analyze the effects of taxing, or increasing

taxation on a good, whether or not the taxation satisfies the goals.

The Social costs of alcohol involve the cost of production, cost of

purchase and negative externalities such as alcohol poisoning and

drunken driving deaths and violence.

The social benefits are the profit made by producers, the utility

gained by consumers and externalities such as prevention of heart

diseases.

The imposing of substantially higher taxes on the sale of alcohol may

be good in two ways:

Firstly, alcohol is regarded as a habit forming good. Hence it may be

assumed that either it disobeys the law of demand (quantity demanded

of a good is inversely proportional to change in price, all other

factors remaining constant), or it is price inelastic (a percentage

change in price causes a smaller percentage change in quantity

demanded). Although imposition of taxes will increase the market price

of alcohol, the change in demand would be substantially lower.

Therefore the government would gain revenue, which it may use for

provision of welfare.

Secondly, alcohol is a demerit good. It has private benefits as an

industry, and it provides utility and satisfaction to consumers. Its

positive externalities include reducing coronary diseases, and

providing amusement to others in social events. However, its negative

externalities include addiction, drunken driving accidents and fights

which result in property damage, and provide a burden to society. Its

positive externality of preventing coronary diseases arises only from

Show More
Related

  • Plunkitt of Tammany Hall

    1534 Words  | 4 Pages

    21. Concerning Excise- Every time there is an increase of the fee in The Raines Liquor Law, there is an increase in the suicide record of the city. If it is a right to tax a saloonkeeper $1000, its right to put a heavy tax on dealers in other beverages- in milk, for instance- and make the dairymen pay up. If the Raines law gave the money extorted from the saloonkeepers to the city, there might be some excuse for the tax.

    Read More

  • The Whiskey Tax of 1791: Insurrection and Early Government Debt

    1607 Words  | 4 Pages

    For this, individuals believed that no democratic government had the right to tax any beverage. Although it seemed harmful to people’s health in the eyes of scholars, this special beverage came from the Scottish where just like any other drink it was distilled using a pot still. For them and the rest of the country it seemed perfectly fine to a point that there was no need to excise tax on a mere drink. Hogeland emphasized that even if the drink was lethal many Americans would still consume it as if it were water. Therefore, it seemed merely incorrect to tax on a distilled beverage, when it was a common consumption of the working class. The democratic government thought it was not only a must, but it was acceptable. Once the whiskey arrived to the United States the government noticed the consumption of whiskey was extraordinary. Now, what other way to pay off a debt when you have thousands of customers consuming the beverage of past time. Iain Gately’s book Drink: A Cultural History of Alcohol proves how alcohol affected the society. Whiskey spiraled out of control, most of the money went to those who lived in Forks or Ohio. The Federalists noticed how much money it was bringing to the table and since the government could not raise the tax on land any higher, it seemed efficient to add a new tax which became the first federal income tax in the United

    Read More

  • Underage Drinking and the American Citizen

    1119 Words  | 3 Pages

    In the contents of this paper, four points of view will be discussed on an extremely controversial issue that has an effect on a large percentage of citizens in the United States. The issue at hand is whether the legal age to consume alcohol should be lowered from 21 to 18, and will state a pro and con side, as well as 2 stakeholders for each side of the argument. The stakeholders on the pro side are as follows: Underage consumers of alcohol, businesses that sell and the companies that produce alcohol. The people on the con side of the argument that would want the legal age to remain at 21 include State and Federal Law Enforcement Agencies, as well as the demographic of Parents that would prefer to keep their children from being exposed to alcohol at a potentially young age. As you continue to read the stakeholders opinions and arguments will be explained, after which the author’s personal opinion will be advanced. After doing my own in depth research on the topic, the legal age to consume alcohol should remain at 21 as set by the United States Congress when they passed the National Minimum Drinking Age Act (NMDAA) in July of 1984. This act punished every state that allowed persons below 21 years of age to purchase and publicly possess alcoholic beverages by reducing its annual federal highway apportionment by ten percent. (National Minimum Drinking Age Act) This caused all fifty continental U.S. states to set their legal drinking age to 21, and it has remained there for thirty years.

    Read More

  • Economic and Social Effects of Prohibition

    1180 Words  | 3 Pages

    Economic and Social Effects of Prohibition There are many ways in which prohibition of alcohol consumption in the United States of America, damaged the very economic and social aspects of American culture, that it was. designed to heal the body. “Prohibition did not achieve its goals”. Instead, it added to the problems it was intended to solve.”

    Read More

  • Minimum Unit Pricing for Alcohol

    727 Words  | 2 Pages

    The government has recently shelved a proposal for a minimum unit price for alcohol. For the purpose of this assignment I will be examining the economic theories behind the decision such as demand, supply and elasticity. Along with this I will be discussing the likely economic effects that a minimum price on alcohol could have .

    Read More

  • What Were The Four Main Arguments In Favor Of Paternalism?

    473 Words  | 1 Pages

    The concept of “paternalism” in regards to slave owners taking responsibility for the production of work, and moral well being of their women,children,and slaves who worked the plantations. One planter is known as the head or authority of plantation which owns the rights to slaves (property) and the slaves rights are to protect, obey, and care for their "master." This set the culture boundary between slave owners and slaves.This concept made slave owners feel as if what they were doing were a kind gesture for slaves.

    Read More

  • Three Economic Stances

    467 Words  | 1 Pages

    What are three economic stances that a government may have? Describe each of these stances. A neutral stance indicates a balanced economy. In most cases, this stance leads to more tax revenue for the government. Expansionary stance is a stance that implies that the government is spending or allocating more money than it collects. Contractionary stance is a stance that implies that the government is collecting more money that it spends or allocates.

    Read More

  • British Alcoholism

    929 Words  | 2 Pages

    Per-capita consumption of alcohol in the United Kingdom (U.K.) rose 19% between 1980 and 2007, compared with a 13% decline for all 30 countries in the Organization for Economic Cooperation and Development. That’s a shocking number to be an alcohol level. In Britain many people are concerned about the alcohol consumption level, but on the other hand scientists say that the consumption of liquor is not the problem. They believe alcohol is the solution to a deeper problem people in the U.K. have. Scientists believe that more people are drinking because depression is becoming more common. While scientist think that people are drinking to help cope with their depression, the people of Britain feel that the high level of consumption is getting higher because people are just drinking because they can. Alcoholism is a big ordeal in Britain for the fact that it is costing them about 6 billion pounds a year. The average person from Britain has fifteen and one half liters of pure alcohol to drink daily. The people of Britain think the cost is not worth it. The country won't make it much longer paying that much just for liquor. Alcohol has been around for ages and people don't assume it is going to go away anytime soon. The discovering of alcohol turned into the production of alcohol for sell. But, with the sale of it came the overuse of it. And the overuse became the abuse of it. Alcohol might not have been the best find, but it was one of the most popular finds in history.

    Read More

  • The Pros And Cons Of Government Intervention

    226 Words  | 1 Pages

    If the president does not intervene in both countries then it can cause an economic disaster in the US. The president needs to intervene in scenario A because it would jeopardize the investment of the US corporation by disrupting the oil productions that would impact the oil prices. The Caribbean country is asking Russia for help by having a Russian base on their land in order for them to have a better economic and protection but this scenario puts american lives at risk. In scenario B, the Mootie dictatorship seized power over the Zootie. This caused the Zooties to have ties with ISIS and cause the killing of leaders in the Mootie government. The US has to intervene because their land has natural resources like coltan and uranium.

    Read More

  • Why Do States Benefit Taxes?

    483 Words  | 1 Pages

    Excise taxes consisted of three excises. One of the excise is luxury excise. Luxury excise taxes are levied on items on unique or predominately for prestige people. In the past, taxes were implemented on expensive items like yachts, expensive automobiles, and expensive automobiles. Luxury excise is paid at federal level. One of the issue that people have hard time to determine luxury. For example, the value of the product determines the luxury. Another issue is that this can create distortions between taxed and untaxed. Sumptuary excise is another excise tax. Sale taxes are regulatory in nature. Taxes on alcohol and tobacco were set high for people that consume it. In 1990 ,the government raise taxes on these products to assist with other programs. Sumptuary excise has two reasons why it will be regressive which is that alcohol and tobacco usage is gear towards low income instead of high income people and taxes are unit instead of ad valorem and effective tax rates are higher for lower priced brands. Benefit based excises consisted of the basis of the benefits concept. The concept is that the tax should levied on individuals who cause particular services to be provided and to proceed from taxes should go to finance a service For example , Motor vehicle fuel taxes. Taxes that are collected from this fuel taxes is use for

    Read More

  • Argumentative Essay On Underage Drinking

    754 Words  | 2 Pages

    Underage drinking causes people to make bad decisions, such as; driving while intoxicated, becoming pregnant, and making a complete fool out of themselves. While intoxicated, are just being a few instances that can and will impact your life forever. Some individuals don’t understand what alcohol really does to the body. Beer has empty calories that will make you gain weight. Which is why a lot of alcoholics have larger stomachs, or another term many people use for these large stomachs is, “beer belly.” Some people may say that alcohol helps you escape your problems and is a stress relevant. Alcohol will not only bring more stress onto your life, it will also bring more problems. As much as people may feel alcohol helps, it really won’t help.

    Read More

  • Utilitarianism: The Role Of Legalization Of Drugs In The United States

    1210 Words  | 3 Pages

    Utilitarianism is a hypothesis in standardizing morals holding that the best good activity is the one that expands utility. Utility is defined and characterized in different ways, yet is generally identified with the prosperity of the public. This paper argues whether prohibition of drugs maximize utility or not. In this paper, we shall discuss which of the above mentioned two statements will bring the most happiness to the public.

    Read More

  • Sin Taxing: The Public Health Code Of Ethics

    1918 Words  | 4 Pages

    Sin taxes are levies imposed on an individual that purchases certain detrimental products in a bid to discourage their consumption in society. Payment of sin taxes on alcohol, tobacco, marijuana and unhealthy foods in America is a necessary policy to control unhealthy behavior, fund healthcare costs and subsidize economic shortfalls amid the claims that it impedes autonomy. Since its coinage in the early 16th century, sin taxing has proved as effective way of discouraging harmful practices. Nonetheless, since human nature makes people yearn to go against the norms, people have often made the choice to consume the “sinful” products thus creating a rich source of government revenue. (Altman, 2009)

    Read More

  • The Economic Cycle And Fyclical Phases Of The Business Cycle

    1779 Words  | 4 Pages

    Lower taxes can be used to stimulate demand for goods and services by increasing disposable income thereby bringing about changes that can increase income, output and employment. In a micro economic context, taxes can be used to regulate consumption of certain goods in the economy. If government wishes to discourage the consumption of say cigarettes, it can raise the tax on cigarette and vice versa. In addition, the government can encourage the production of certain goods in the economy by lowering taxes on them, while it may raise taxes if she wants to discourage their production. Arguments have also been made to justify the imposition of taxes on income distribution grounds. By levying in a progressive manner, the gap between the rich and the poor is bridged

    Read More

  • History Of Alcohol In South Africa

    1259 Words  | 3 Pages

    In summary, alcohol abuse is more prevalent in recent times and can be attributed to alcohol advertisements. These advertisements insidiously and inadvertently influence alcohol use and abuse by the youth. The ban of alcohol advertisements will alleviate the detrimental public health effects on South African youth. In contrast the alcohol industry argues that the ban will have a negative on the South African economic growth. The general global view of the youth regarding alcohol advertisements is that the campaigns encourage alcohol use.

    Read More

More about Discuss economic arguments for and against imposing substantially

Open Document