The Pass‐through of Beer Taxes to Prices: Evidence From State and Federal Tax Changes

Abstract

From a policy perspective, it is crucial to understand how changes in beer taxes affect retail beer prices. This study provides new evidence of the pass‐through rate of state beer taxes to prices in a post‐merger era. Our estimates that use state‐level beer tax changes suggest that a 10‐cent increase in beer taxes raises retail prices by about 17 cents. Comparable findings from the 1991 federal beer tax increase show a rise in retail beer prices of 19–22 cents. Our findings suggest that consumers fully bear the burden of increased beer taxes. (JEL H2, I0, D4)

Tax pass-through in the European beer market

“…We employ a panel of beer price indices and tax rates of the various EU member states in our analysis, treating these member states as a valid counterfactual for each other. Similar to incidence studies that have considered states or cities within the US, or within other countries, as a credible counterfactual for each other, see Evans, Ringel and Stech (1999), Besley and Rosen (1999) Harding, Leibtag and Lovenheim (2012), Shrestha and Markowitz (2016), Kopczuk et al (2016), and Young and Bielińska-Kwapisz (2002), for example, we argue that this strategy can also be employed to estimate pass-through rates in Europe. This approach is in contrast with most of the existing empirical literature on European countries,…”

The Effects of E-Cigarette Taxes on E-Cigarette Prices and Tobacco Product Sales: Evidence from Retail Panel Data

“…Researchers have also estimated pass-through rates for other 'sin goods:' alcohol and sugar-sweetened beverages. Several studies find that alcohol taxes are more than fully passed through to prices (Kenkel 2005, Shrestha and Markowitz 2016, Shang, Ngo, and Chaloupka 2020, Gehrsitz, Saffer, and Grossman 2020. Recently, Cawley et al (2019) review 15 studies on passthrough rate for sugar-sweetened beverages, concluding that trends in prices after nationwide tax implementations are in line with the hypothesis that prices rise by the full amount of the tax.…”

Are Excise Taxes on Beverages Fully Passed Through to Prices? The Danish Evidence

“…Carbonnier (2013) compares the incidence of per-unit and ad valorem taxes on beer and aperitifs in France and finds that the effect of the former exceeds that of the latter. Shrestha and Markowitz (2016) use data on four different brands, study two tax hike events, and analyze whether the two major mergers in the beer industry have affected tax pass-through. They find that excise taxes are overshifted: a 10-cent increase in taxes on a six-pack of beer led to a 17-cent increase in after-tax prices during the period 2000-2014.…”