During the pandemic, we have come to see how tight regulations in Minnesota’s industry hurt craft breweries and other liquor establishments, as well as 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.
A new report from the Tax Foundation reveals, however, that tight regulation is not the only issue we need to worry about. 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 taxes on distilled spirits in the country. Residents in Minnesota pay $8.61 excise tax 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 17 highest tax rate on wine, 9th highest tax on champagne and 9th highest taxes on 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 they target consumption –– the poor spend a high proportion of their income on consumption and therefore pay a higher proportion of their income on said sin taxes.
So, Minnesota’s high liquor taxes are a burden not only to the industry but to low-income residents.