The Govt quickly ruled out the likelihood of raising liquor excises, a key Law Commission proposal for reducing the harm from alcohol. It thus spurned a two-fold benefit. First, increasing the revenue collected from our favourite tipples would reduce the sum needed to be collected from income taxes. Anybody who drinks would pay more excise tax, true, but studies done for the Commission and for ALAC by economist Brian Easton show most people would be better off. The extra excise taxes they paid would be less than the income tax reduction. Heavy drinkers would pay more excise tax, but they are a relatively small chunk of the community.

Ease Pressure. A second benefit would be to ease the pressure on public resources. At least some alcohol-based harm would be reduced, reducing the burden imposed by binge drinkers (mostly) on health, law enforcement and so on. The A&E departments in our hospitals are kept notoriously busy on Friday and Saturday nights because of excessive boozing. Again, most of us would be better off because more health money would become available for hip replacements and what-have-you. The benefits should not be allowed to justify unlimited price hikes, however, because excessive excises would only drive people to setting up illicit stills and black market dealing. There are other ways of using price mechanisms to discourage liquor consumption. A minimum price could be imposed to ensure against sales of cheap alcohol. But requiring retailers to raise alcohol prices would raise their profits, giving them a bigger war chest for advertising. Significantly, the hospitality industry’s Bruce Robertson told Radio NZ he opposes higher excise taxes but he could live with a minimum pricing regime.

Taxes Work. Higher excises work, but can have unintended consequence. In 2003 Jim Anderton promoted legislation to lift the excise duty on “light spirits,” or beverages containing 14 – 23% of alcohol-by-volume. This discouraged younger people’s consumption of those products but made fortified wines more costly, too. The biggest demand for sherries and ports is from price-sensitive older people. Compounding the blow, the new regime created cash-flow difficulties for local producers, many of them small family-run operations, because excises must be paid before the product is released into a highly competitive marketplace. Vintners can’t easily pass on the excise to retailers. Many gave up making fortified wines. Wine NZ says excises have risen 60% in the past 20 years, far ahead of any rises in wine prices.

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