Should Alcohol Taxes Pay For Mental Health Programs? Do the Math

Improving the Mental Health System

According to a news release that was dated May 9, 2006, the “Standing Senate Committee On Social Affairs, Science and Technology” in Canada recommended the creation of a Canadian Mental Health Commission that will be responsible for significantly upgrading the Canadian mental health system. As stated by Senator Michael Kirby, the Chair of the Committee, “The Senate Committee is committed to improving the range, quality and organization of health and support services that are required by the tens of thousands of Canadians who are living with mental illnesses and addictions.”

Funding The Proposed Change

Based on an extensive three-year study on mental health and addiction, the Committee determined that it will cost $5.36 billion over a 10-year period for this mental health system upgrade. Where will these funds come from? According to the Committee, the revenue will come from raising the excise tax on alcoholic drinks by 5 cents per drink.

Part of the rationale for the 5-cent increase per drink was obviously the goal of raising the needed funds for the proposed changes in the mental health system. Another justifying factor for the price increase, however, was the fact that since each alcoholic drink will cost more, Canadians will be more inclined to drink lower-alcohol products such as beer and wine instead of liquor.

Let’s Do the Math

At first glance, this proposal seems to make sense. Why shouldn’t those who drink help finance a program that will provide them with a better mental health system? Why not let those who are part of the “problem” become part of the “solution”? This logic seems sound until you do the math. If $5.36 billion is needed to help finance the upgraded mental health system, then how many drinks will have to be consumed in a ten-year period to reach $5.36 billion dollars? The answer: 107,200,000,000 drinks. That’s 107 billion, 200 million drinks.

To arrive at how many drinks this is per year, all we have to do is divide this number by 10 (for the ten-year program) and the result is 10,720,000,000. This is still a huge number that fortunately can be “massaged” even more. According to The World Factbook website, the population of Canada was estimated to be 33 million people in 2006. Dividing 10,720,000,000 by 33,000,000 equals 325. Putting this in terms that the average person can understand, every man, woman, and child in Canada will have to consume 325 alcoholic drinks per year for the next ten years to finance the new mental health system! Simply put, these numbers are not realistic.

More Flaws

The “logic” of this proposed mental health program also breaks down when it is examined more deeply. For instance, why would people drink lower-alcohol products such as beer if the increased excise tax applies to all alcoholic drinks? To help understand this better, let’s use an example. Let’s say that the average shot in Canada currently costs $3.00 and the average beer costs $1.00. Based on the proposed price increase, if Joe drinks an average of 5 shots per week, his weekly average alcohol expenditure will be $15.25. When the numbers are calculated, this figures out to be 1.7% more than Joe would have spent before the proposed tax increase. Let’s do a similar exercise with beer. Based on the projected price increase, if Pete drinks an average of 5 beers per week, his weekly average alcohol expenditure will be $5.25. When the numbers are calculated, this figures out to be 5% more than Pete would have spent before the proposed tax increase. The point: since the proposed price increase affects higher-alcohol products (such as shots) proportionately less than their lower-alcohol counterparts (such as beer), why would Canadians switch to lower-alcohol products?

Alcohol and Mental Health

Another question. What if tens of thousands of Canadians, realizing that drinking alcohol is not good for their “mental health,” significantly reduce their alcohol intake or quit drinking alcoholic beverages altogether? Where will the money come from to offset this lack of revenue? In a similar manner, what if thousands upon thousands of Canadians who drink alcoholic beverages decide that they don’t want to pay the extra excise tax and, as a result, stop drinking alcoholic beverages? If this happens, where will the government get the money needed to transform the mental health system? In other words, does the Canadian government have a realistic “plan B” for this major transformation?

A Logical Contradiction

From a different perspective, isn’t it rather ironic that those who drink alcoholic beverages will pay for the revamped mental health system? Isn’t there a contradiction in logic somewhere in this proposal? Stated differently, if tens of thousands of Canadians have mental illnesses or are addicted to alcohol or drugs, wouldn’t the government want Canadians to drink LESS alcohol in order to reduce the existing alcohol abuse, alcoholism, and alcohol-related mental health problems? Yet according to the current mental health proposal, from strictly a financial standpoint, it would appear that the Canadian government is banking the entire mental health system upgrade on historical data that strongly suggests that Canadians will continue to drink at their current or even higher levels of consumption.

Budgetary Miscalculations

What happens, for instance, if there are cost overruns in the proposed mental health system? There are, of course, two “easy” solutions to this problem: increase the excise tax on each drink or motivate Canadians to drink even more alcoholic beverages. Either “solution,” however, is predicated on the fact that in order to “work,” the upgraded mental health system needs to be funded by Canadians who continue to drink alcoholic beverages.

Conclusion

It appears logical to conclude that the Canadian mental health system is in need of a major overhaul. As with most comprehensive government programs, however, the issue of funding becomes a major obstacle to overcome. The proposed Canadian mental health system upgrade is no exception. Based on the reasons given above, it seems obvious that the Canadian government needs to come up with alternate sources of revenue generation for this worthwhile project. Indeed, to point out one of the major “flaws” in the current proposal, consider the following question: When is more drinking a “good thing?” Answer: when it finances a nationwide mental health system upgrade. Something tells me that Andy Rooney from “60 Minutes” would have a lot of fun with this.

This entry was posted in Uncategorized. Bookmark the permalink.