Minnesota alcohol tax hike proposal stirs state

Sipping a beer at O'Gara's Bar and Grill the other day, Sandi Valli said she doesn't mind spending an extra dime on a drink to repay schools and lower property taxes. Across town, a retired accountant who likes his nightly cocktail had another view.

"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."

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.

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.

DFL Gov. Mark Dayton has long been cool to hiking the alcohol tax. But lately, his administration said he might be able to accept a higher alcohol tax if it is part of a global budget solution.

The issue has stoked more than the usual intrigue at the Capitol, because Messinger is married to Dayton's former wife, one of the governor's biggest political allies.

Senate DFLers have a similar measure that specifically earmarks the extra tax revenue for chemical addiction programs and related costs. If there is money left over, it flows back into the general budget for parks, schools and other needs.

Senate Taxes Committee Chairman Rod Skoe doesn't like the alcohol tax or the separate account. It can be tough to redirect money if the economy tanks or political whims change, he said.

Skoe has no plans to include an alcohol tax in the Senate's overall tax proposal, set to be released later this week.

"These taxes just aren't moving us in the right direction," said Skoe, DFL-Clearbrook. "I just don't think we are going to tax alcohol this year."

"If it's for the schools, go for it," said Lori Barrett, 58.

Patti Tuset, 57, wasn't so sure: "Aren't we taxed enough? Isn't this the easy way out?"

Over at Obb's, the regulars remain firmly opposed.

But as Mangin contemplated whether it would change his drinking habits, he was clear.

"Never," he said. "That's an entirely different question altogether."