Note to Goreham: Taxes Affect Consumption
The Collegian ran an article this morning about a proposed 10% tax on poured drinks being discussed by small town leaders across the state. State College Mayor Elizabeth Goreham was quoted as saying,
“It would not discourage people from drinking. If it did, it’s not a bad thing.”
Thanks for playing, Liz, but you’re wrong.
Increasing the price of booze in bars is going to, according to economic theory, do precisely what Goreham believes it won’t; that is, “discourage people from drinking” in bars. See the nifty chart I found on the Internet to visualize why this is.
So what would be the actual impact of a poured drink tax? Sure, some bar and lounge enthusiasts might simply drink less on each visit (the novelty!), but another reaction to seeing your bar tab go up 10% would be to refrain from going to the bar at all and take the party elsewhere, to a house or apartment in downtown State College. And that’s something that would probably be “a bad thing.”