Targeted taxation

Massive increases in the tax on alcohol have recently been mooted as a way to stem the binge-drinking culture. Yet how does the government go about this without unfairly penalising the 90 percent of drinkers who don’t consume alcohol to excess?

Today, George Osborne offers a solution.  His idea is to only increase the tax on those drinks which are associated with binge-drinking.  So alco-pops and cider would be targeted, rather than wine and beer.  In fact, says Osborne, the extra revenue raised could be used to lower the tax on those beverages enjoyed by the sensible drinker.

The only problem with this kind of targeted taxation is that it might force binge-drinkers to move onto other – less heavily taxed – forms of alcohol.  So, either binge-drinking remains, or taxation follows these drinkers around so that eventually all alcohol is heavily taxed.  Two outcomes that legislators wanted to avoid in the first place…