Thursday, February 26, 2009

Sin Taxes and Blue Laws: Minnesota’s Sunday Ban on Alcohol Sales

Facing extraordinary budget deficits, state lawmakers appear to be searching for any new source of revenue they can find. In 2008, Rep. Phyllis Kahn introduced legislation to overturn Minnesota’s 75 year-old ban on Sunday off-sale alcohol sales. Though that legislation did not pass, Rep. Tom Anzelc appears to be trying to bring it up again this session. Additionally, liquor store owners are arguing that repealing the ban will increase sales and prevent potential buyers from border-crossing on Sundays to Iowa, North Dakota, or Wisconsin, all of which allow off-sale alcohol sales on Sundays.

Taxes on Alcoholic Beverages Sold Off-Sale

Buying a 12-pack of Summit beer in Hennepin County generates several forms of revenue for state and local governments. First, there is the general 6.5% sales tax. Next, there are the sin taxes- a special general receipts tax of 2.5%, a special wholesale tax that equals about $.17 per 12-pack, and a special $.01 per bottle tax ($.12 per 12-pack). Finally, Hennepin County receives a total of .65% in additional local sales taxes. This all totals to 9.65% in retail taxes, plus $.29 in wholesale excise taxes. For a 12-pack of Summit costing $12, this amounts to nearly $1.45 in state and local revenue. In 2008, the State of Minnesota received $73M in revenue from the special excise tax, and $65M in revenue from the special general receipts tax.
(Data from the Minnesota State Tax Handbook, 2008)

Is a repeal worth it?

While there is not a lot of academic research available regarding this specific policy issue, two studies appear to be particularly relevant. The results of a controlled study out of Sweden showed that a repeal of an off-sale alcohol ban resulted in a 3.7% increase in alcohol sales (and correlating increase in consumption), with no significant increase in harmful effects of alcohol consumption. Another study examined the effects of border-crossing present in states with blue laws, and found that a significant amount of liquor sales after the repeal of a Sunday ban are sales that are recovered from potential buyers that would have previously crossed a border to a state without a Sunday ban. While both findings provide support for repealing Sunday sales bans, additional research needs to occur to estimate what the potential revenues and costs of repealing the Sunday ban will bring to Minnesota. What do you think? Should Minnesota repeal the ban on off-sale alcohol sales on Sundays?

1 comment:

  1. Excellent post.

    Thanks especially for providing the information about wholesale tax for alcohol beverage taxes, which we didn't discuss in the class. (For details, see page 23-24 of the MN Tax Handbook.)

    Note that the two wholesale taxes -- about $.17 per 12-pack (calculated by volume and alcohol percentage) and $0.01 per bottle or container -- are collected from licensed manufacturers or
    wholesalers. So they are (partially) included in the retail price already, and you don't see the taxes listed in your receipts.