Minnesota charges brewers and wholesalers that sell their products in the state a different excise tax rate based on the type of alcohol.
Lawmakers' plan to boost alcohol taxes in Minnesota could add as much as $2 to the cost of a standard 12-pack of beer, local brewers and liquor lobbyists said Tuesday as they tried to rally opposition to the proposed tax spike.
House Democrats argue that a hike in Minnesota's alcohol excise tax, which was part of the tax package they unveiled Monday, would be a small, 7-cent-per-drink increase to help the state raise revenue and pay for the social costs of alcoholism. But executives at two of Minnesota's largest homegrown breweries said the proposal would quadruple their annual tax bills and eventually hit beer drinkers' wallets.
"Ultimately, we throw our customers under the bus and expect them to pay for this," said Mark Stutrud, founder and CEO of St. Paul's Summit Brewing. "I'm terribly uncomfortable."
Minnesota charges brewers and wholesalers that sell their products in the state a different excise tax rate based on the type of alcohol. Currently, brewers including Summit pay the state $4.60 for every 31-gallon barrel they brew. Liquors and other spirits are currently charged $1.33 for each liter bottle. For bottles of wine, it varies based on alcoholic content.
Those rates haven't changed since 1987. The House tax bill looks to bump up all of those taxes, by as much as $27.75 for each barrel of beer.
Summit expects to brew about 120,000 barrels of beer this year, Stutrud said. Even after a $1.4 million tax credit, the proposed increase would increase Summit's tax bill to the state from about $550,000 last year to about $1.9 million. Ted Marti, president of August Schell Brewing Co., said he expects a similar figure for his brewery in New Ulm, Minn.
Stutrud and other opponents of that increase said it would compound as a barrel travels to the consumer: Brewers will hike their prices to distributors to cover the cost of the tax increase, then distributors will do the same before selling to retailers. Eventually, the trickledown results in higher prices on bar menus and liquor store shelves.
"It's not 7 cents a drink anymore. It's terrible spin. It's a lie," Stutrud said.
House Tax Committee Chairwoman Ann Lenczewski, DFL-Bloomington, said she doesn't buy that argument.
Lenczewski said the projected revenue from the excise tax increase would do little to tackle an estimated $3 billion in costs for alcohol abuse.
"We're trying to get the high users of alcohol to help the state recoup some of its costs," she said.
Lenczewski said the bill deliberately provides extra help to Minnesota brewers small and large. It includes a tax credit that wipes out the excise tax for up to 50,000 barrels a year, so microbreweries would be off the hook. Brewers and wholesalers who sell more than 200,000 barrels a year aren't eligible.
"They don't feel that way because it's a tax increase, but they're getting special, preferential tax treatment," she said.
Stutrud said Summit is on track to pass that 200,000-barrel threshold in the next five to six years, and August Schell may do the same. That means both companies could lose that tax credit.
Even at that point, Marti said: "You're by no means a large brewer."