Brewer says a higher tax would hit hard; legislators say it’ll barely be felt.
Lori Barrett, left, Josie O’Connor and Barbara Mudek shared opinions about the alcohol tax as they met to help plan Humboldt High School’s 40th reunion during happy hour at O’Gara’s in St Paul last week.
“I am against it, absolutely against it,” Joe Mangin, 85, said while stirring the ice of his rusty-colored cocktail at Obb’s Sports Bar and Grill on the east edge of St. Paul. “The people who like to drink, we are being discriminated against.”
The fight at the Capitol over balancing the Minnesota budget has taken a sharp turn in recent days, as House DFLers put their muscle behind a dramatic hike in the alcohol tax to help repay the state’s debt to public schools and boost property tax relief. With Democrats firmly in power at the Legislature, the fight has become one of the most intense and unpredictable of the year. The state’s powerful liquor industry and craft beer brewers strongly oppose the hike and successfully have blocked any tax bump since 1987. But leaders of well-connected chemical dependency programs are lining up for a share of the new money to treat addiction and potentially save taxpayers millions.
House DFLers say most consumers will hardly feel a pinch, averaging just 7 cents for a glass of beer. Someone who has a beer a night will spend an extra $25 a year.
But the head of Minnesota’s second-largest brewery says House DFL leaders are misrepresenting the impact of the proposed increase. The proposal will hike the excise tax from $4.60 to as much as $27.75 for a 31-gallon barrel of beer.
Mark Stutrud, founder and CEO of Summit Brewing in St. Paul, said legislators’ characterization leaves out the little-known reality of the brewing business: The tax is applied at the brewery. Once the distributor and retailer tack on their increases — multiplying the impact of the tax — the additional price of a glass of beer is really like 14 cents. For a case of beer, consumers can expect to pay an additional $4.
“This is very, very sneaky,” Stutrud said. “The tragedy is that the consumer ends up with the bill and they have no idea what the heck happened.”
Legislators are considering a tax credit to help the state’s brewers, like Summit. But Stutrud said that for his company the tax credit will reduce only some of the new tax’s bite — about 30 percent.
Since Summit sells about 90 percent of its beer in Minnesota, the company is deeply vested in the outcome.
“We make our living out of selling more beer here, in our own front and back yard,” Stutrud said. “We don’t have any national ambitions. This makes that vision pretty fuzzy.”
Chemical addiction specialists say that excess alcohol consumption costs taxpayers billions of dollars a year in health care, judicial and law enforcement costs. Using even a portion of the new money raised, they said, could go to help treat those most in need.
In a state where one in every seven drivers has a DWI on his or her record, the Minnesota Health Department has estimated that alcohol costs the state economy about $5 billion annually in lost productivity, health care and criminal justice costs. That’s about $975 for every Minnesotan.
Chemical addiction experts say the tax hike will hit hardest on those who drink the most — the ones who historically have placed the heaviest burdens on the system.
According to a Gallup Poll last year, 86 percent of Americans drink moderately or not at all, consuming fewer than eight alcoholic beverages a week. About 6 percent of Americans have more than 20 drinks a week.
Polls in Minnesota and nationally have shown wide support for higher alcohol taxes.
“The average drinker isn’t even going to see it; it’s a very popular idea with the public,” said Bill Messinger, who owns a company that offers a range of chemical addiction programs. “This impacts the group that has many drinks a week.”
Messinger is lobbying at the Capitol to carve out millions of dollars from the new alcohol tax money for preventive addiction education, drunken-driving courts, treatment programs and supportive housing.
But that need is rushing headlong into a stark political reality at the Capitol — DFL legislators need money to balance the budget and make good on a long list of campaign promises, from property tax relief to the school payback to paying down the $627 million deficit.