The Cost of Alcopops to Youth and California

Marin Institute July 2007

Alcopops cost California Key Findings

Correctly taxing alcopops in California could: 1.25 billion n Save the lives of 21 youth each year dollars n Save $437 million each year 60 n Reduce underage alcopop consumption lives by 35 percent 50,000 incidents of harm Alcopops are sweetened alcoholic beverages that Lower Taxes Keep Kids Hooked are often bubbly and fruit-flavored, and resemble soda or other soft drinks. While these products Because the calls alcopops derive much of their alcohol from distilled spirits “flavored malt beverages,” California’s Board of (and are often branded with spirit names such as Equalization (BOE)—the state agency respon- “ Ice”), industry calls them “flavored malt sible for taxation—currently taxes alcopops as beverages,” because that makes them sound like , at the relatively low rate of 20 cents per gal- beer, which keeps their taxes low. lon. In addition: Thanks to a government petition filed by California Friday Night Live Partnership n Young drinkers in California ages 12-20, on and California Youth Council, two youth average, consume 5.5 times more alcopops per year than adult drinkers. Alcohol companies save $3.10 per gallon of alcopops in excise n Underage drinkers consume 47 percent of all the alcopops in California. taxes, simply by claiming these products are “malt beverages.” Costs of Underage Consumption groups, the state is currently considering re- Marin Institute estimates that under- classifying alcopops as distilled spirits. Marin age drinking of alcopops costs California Institute undertook this original data analy- a total of $1.25 billion annually. This fig- sis to calculate the true cost of alcopops in ure reflects the costs (in both public and California, both in terms of lives and money. We private money) of the numerous risks of under- emphasize the critical policy reasons for taxing age drinking, which include everything from alcopops at the higher distilled spirits rate. We traffic accidents to violent crime, to high-risk sex, also estimate how much money industry gen- to fetal alcohol syndrome. But the dollar amount erates from underage alcopop consumption. doesn’t do justice to the human toll. Finally, we describe how other countries are tax- We calculate that underage drinking of al- ing alcopops significantly higher, with extremely copops causes approximately 60 deaths every positive results.

Annual Incidents of Harm Due to Underage Alcopop Consumption

Type of Harm Current Incidents Preventable Incidents (taxed as beer) (taxed as distilled spirits)

Theft, Burglary 24,577 8,601 Violent Crime 9,282 3,248 High-Risk Sex 7,606 2,662 Traffic Accidents 5,875 2,056 Alcohol Treatment 1,226 429 Other 1,539 538

TOTAL 50,105 17,537 year in California and that the total incidents of harm caused by underage drinking of alco- Tax per Gallon of Alcopops pops tops 50,000. $25.00

$19.84 Correct Taxation $20.00 Would Save Lives $15.63 Our calculations show that correctly classify- $15.00 ing alcopops as distilled spirits would increase

$10.00 $8.69 The alcohol industry makes $8.12

$210 million a year in $3.88 $5.00 alcopops sales to California’s $0.78 underage youth. $- C u rrent P ro po s ed UK Denm ark G erm any S witzerland C alifo rnia * C alifo rn i a * the price of these beverages by 25 percent. This translates to a reduction in overall con- * includes federal sumption (for all age groups) in the range of 31-40 percent, or about 35 percent. California and United States Lagging Behind

If underage consumption went down by 35 n In the UK and Denmark, the tax on alcopops is percent, California could save $437 million. eight times higher than the current combined fed- More importantly, we would save the lives of eral and California taxes; in the tax is 16 21 youth and prevent more than 17,000 inci- times higher; and in Switzerland, 20 times higher. dents of harm. n Even if California were to properly classify al- copops as distilled spirits, these countries would still have much higher tax rates: the UK and Danish The current low alcopop taxes would still be twice as high, the German tax tax keeps industry prof- four times higher, and the Swiss tax five times its high, but the cost to higher. our youth is even higher. California prides itself n Most importantly, the higher taxes in Europe on being a policy leader result in higher prices. In the US, a of alco- both in the United States pops costs on average $1.09, while the same bot- and internationally. We tle costs about $3.05 in the UK , $3.31 in Germany , urge the state to show and $3.65 in Switzerland. In other words, for every leadership on this issue bottle a young person can buy in Germany, they and correctly classify al- can afford three in California. (This trend is not lim- copops as distilled spir- ited to alcopops; the US currently has the second its. The very future of our lowest alcohol prices in the world, behind only youth depends upon it. Luxembourg. ) In 2004, the German government also creat- Success of Alcopop Taxes in Europe: ed a new alcohol classification and increased alco- Lower Consumption pop taxes over spirits. The following year, alcopop sales dropped 75 percent and alcopop consump- In the United Kingdom, alcopops were properly tion went down by half among teenagers because, classified as distilled spirits in 2002 and consump- according to one survey, “alcopops became too tion dropped by 30% in the following year. expensive.” In 2004, the Swiss government created a new alcohol category to address youth consump- Study prepared by Simon Rosen and Michele Simon. tion of alcopops, increasing the tax to four times that of spirits. Following this increase, imports of For complete report, visit: alcopops dropped by almost 70 percent. www.marininsititute.org/alcopops

What Can We Do?

For every alcopop a young person can buy in Germany, Lawmakers n Require larger, clearer labels on alcopops n Raise alcohol taxes n Limit retail outlet sales n Stop accepting donations from the alcohol industry

they can afford three in Industry California. n Stop marketing to youth n Stop manufacturing alcopops n Stop lobbying against health policies

Communities n Reject alcohol sponsorship n Reject outdoor

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