Taxation on Alcohol

Increased Taxation on Alcohol

Alcoholic beverages and consumption of these particular beverages are a widely accepted practice in Canada, and among a majority of Western societies. According to a study conducted by the Centre for Addiction and Mental Health of Canada, over 80% of Canadians consume alcohol in moderation (Ialomiteanu et al, 2012). However, despite the popularity of alcohol consumption across a large population set, the negative consequences are becoming a fact that cannot be ignored. As a result of excessive alcohol consumption, chronical illness can arise such as liver disease, heart implications, heart strokes, and high blood pressure, among many other illnesses (CDC, 2014). The raising threat of chorionic illness and risk of premature death is a primary factor in the cause of economic costs and social costs that result in a market inefficiency. Economic costs and social costs as a result of illnesses caused by excessive alcohol consumption include negative externalities, decreased labor force productivity, and increased medical care expenditures. One policy to combat the negative externalities associated with excessive alcohol consumption is to raise current taxation on alcoholic beverages to reduce the overall supply and demand of alcohol in the Canadian market. This particular paper will aim to analyze the effectiveness and ineffectiveness of implementing an increased taxation on alcoholic beverages to promote less consumption and ultimately promote a healthier economy. Through examination of economic implications, advantages of increasing alcohol taxes, and the disadvantages of increased alcohol taxes, this paper will aim to answer the question of whether an increased tax of alcohol is an effective method to decrease consumption.            
Economic Implications
Law of Demand Theory
Another critical economic implication of increased taxation is the effect on aggregate demand. Aggregate demand is calculated through an...