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Bob Leslie, Published May 14 2013

Letter: Liquor tax increase disaster for Minnesota’s border cities

If the Minnesota Legislature enacts a massive liquor tax increase when it finishes its work on Monday, we may have to use Charles Dickens’ “A Tale of Two Cities” to describe the disparity between North Dakota and Minnesota liquor retailers.

The Minnesota House recently passed a plan to increase the state alcohol excise tax by 600 percent on most liquor products. Gov. Mark Dayton and the state Senate have not embraced it, but the liquor tax hike could still become law when budget negotiations are finished.

For retailers near the Minnesota-North Dakota border, this tax increase would be catastrophic.

Minnesota already taxes beverage alcohol at a much higher rate than its four neighboring states. For retailers and consumers in the Red River Valley, these facts are especially compelling: The combination of state taxes on a barrel of beer is already $33.12 in Minnesota but only $27.15 in North Dakota. Under the proposed tax increase, Minnesota’s total state taxes on beer would jump to a staggering $56.27 per barrel. The same sort of tax difference between the two states exists on wine and distilled spirits. For example, North Dakota taxes a gallon of gin at $9.50, while Minnesota taxes the same product today at $14.50 and would tax it at $20.40 if the House plan prevails.

After my 30-plus years of managing municipal liquor stores in Brandon and Pelican Rapids, I know that liquor taxes are ultimately paid by consumers. And today’s consumers are better informed and more price conscious than ever.

It wouldn’t take consumers on either side of the river long to figure out that Minnesota retail prices couldn’t compete. The result: Restaurants, bars and privately owned package stores in Minnesota border communities would quickly lose profitability. Municipal liquor stores would generate less revenue for their city governments. Hundreds of Minnesota jobs in this region would be in jeopardy. And ironically, a tax increase to ostensibly increase state revenues would lead to few tax dollars being collected.

The idea to boost Minnesota’s alcohol tax would be a windfall for North Dakota retailers. While no Minnesotan should begrudge their western neighbors’ economic successes, it’s not our lawmakers’ job to grow the North Dakota economy even more by effectively exporting our liquor business across the river.

At the state Capitol, legislators describe this tax increase as equivalent to only 7 cents per drink. My experience tells me that it will cost consumers more than that. Industry estimates suggest that a case of beer will cost $3 ot $4 more, and wine and spirits will average $2 more per bottle. The smooth talkers in St. Paul make the liquor tax increase sound modest, but people here know that its true costs will be very high indeed, measured in major declines in profits, lost jobs and closed Minnesota businesses.

Leslie, Moorhead, is former manager of city liquor stores in Brandon, Minn., and Pelican Rapids, Minn.