Liquor taxes are high in Minnesota

The coronavirus pandemic has revealed a troubling phenomenon — stringent regulations on the liquor industry businesses and customers. In the name of protecting liquor stores and small craft breweries, laws in Minnesota thwart competition, limiting choice for consumers while also raising costs.

Unfortunately, stringent regulations are not the only hindrance to the liquor industry. As a new report from the Tax Foundation reveals, Minnesota also levies higher-than-average taxes on liquor compared to the rest of the nation.

According to the Tax Foundation, residents in Minnesota pay the 14th-highest tax rate on distilled spirits in the country. Residents in Minnesota pay an excise tax of $8.61 per gallon of distilled spirits, about three times higher than Missouri’s $2.00 per gallon. Additionally, two states, Wyoming and New Hampshire, levy no excise tax on distilled spirits.

The same is true for other types of liquor like wine, beer, and champagne. In 2020, Minnesota had the 17th highest tax rate on wine, and the ninth highest tax on champagne and beer.

Products like alcohol and cigarettes face what are called sin taxes, which are meant to discourage use and abuse. Generally, sin taxes are regressive because low-income individuals spend a higher-than-average proportion of their income on consumption goods, and, therefore, pay a higher proportion of their income on sin taxes.

Minnesota’s high liquor taxes are a burden not only to the industry but to low-income residents.