The current sales tax debate in Minnesota

Mark Dayton's 2013 budget proposal includes numerous changes to the tax code which include closing the loopholes on the corporate tax, giving some property tax relief while at the same time decreasing the overall sales tax.  The way in which he is able to achieve these goals is through increasing the taxes on the top 2% and expanding the current Minnesota sales tax.  His rationale is that property tax , income tax and sales tax should be more like the chairs of a stool in that they are "fair" across the spectrum of taxable revenues.
Dayton's Tax Reform

What is hardly discussed on the govenor's budget and his highly publicized is the reaction to the change in the tax code for the Mom and Pop type companies that might have to add sales taxes to any sale over $100.
Initial Star Tribune Article
Follow Up Article

It has become such a hot button issue that the proposal and the video that the star tribune created is currently the most watched.
Interviews at the Mall of America

So where do we go now?
Considering that sales tax is the largest revenue generator for the state, it would seem that if the increase in a sales tax's breadth makes sense for Minnesota but the public outcry against it might make it politically unfeasible even if it is the optimal solution for Minnesota's tax code.  Ironically this would actually move Minnesota down in the national sales tax from #7 (at 6.875%) to around # 29 (at 5.5%) at the overall rate.  The numbers I do not have is what is the percentage of revenue by tax base that Minnesota currently uses compared to the nation.

And just because I like the economic (not specifically the financial) theory behind why it is so hard to change tax codes, here is a bit on the status quo bias.
Super nerdy Econ Theory on why people hate change

The fight over online sales tax continues

An interesting article on tax from online sale. Will it ever pass?

States push to make Amazon, others collect tax from online sales, but web retailers fight back

Cigarette Sales Tax in New York State

In last week’s class, the topic of black market cigarettes was briefly discussed. Our textbook also addresses the topic in a short article on pages 394-395. In this blog post I want to expand on information concerning sales tax on cigarette and its effect on black market trade.

A great resource to consult is the research completed by The Center for Public Integrity an organization that does investigative journalism and has completed reports on a wide variety of issues including the environment, sexual assault, and the Iraq war. The Center for Public Integrity finds that because of smuggling nations miss out on $40 billion of tax revenue annually. About one billion dollars of that money is solely lost in New York state, “In 2007, New York’s reservations — home to fewer than 17,000 people — sold a towering 6.4 billion cigarettes…every year, the state loses nearly $1 billion in city and state taxes from reservation sales (Willson).” The supply chain of the trade is shown in the diagram below:

To learn more about the New York cigarette black market, check out this video (Willson):

In addition to selling cigarettes to convenience stores in New York, the reservations have increased the illegal trade of cigarettes nationwide. Many Americans purchase cigarettes through websites that dodge the sales tax. The prevalence of these websites increased substantially from 88 in 2000 to 772 in 2006 with the majority of these sites being controlled by smoke shops on New York reservations (Chen). In 2008, New York passed a law that required the reservations to apply sales tax to cigarettes they sell to people not a part of the reservation. Although the trade continues, businesses have been charged with tax evasion (Hernandez).

The situation in New York leads to some interesting questions about the rate of sales tax and cigarettes. Does increasing the state’s sales tax actually lead to an overall increase in revenue or is that revenue lost to the efforts to counteract the negative consequences of an illegal market (i.e. increased policing because of gang violence)? Will additional policies to prevent smuggling effectively counteract the economic forces that drive the black market trade of tobacco? Should the government continue to use sales tax as a means to decrease cigarettes use?

Sources:

Chen, Te-Ping. "SMOKE2U." The Center for Public Integrity. 19 Dec. 2008. .

Hernandez, Javier C. "Illegal Indian Cigarette Sales Uncovered, Bloomberg Says." City Room. New York Times, 16 Sept. 2010. .

Willson, Kate and Marina Walker Guevara. "Big Tobacco’s New York Black Market." The Center for Public Integrity. 19 Dec. 2008. .

Billion Dollar Boondoggle — How Online Retailers Avoid Collecting Sales Tax and What Can Be Done About It

Next year, states will collectively lose out on approximately $11.4 billion in sales taxes on goods sold via the internet. That figure, published in a 2009 study by the University of Tennessee, should have most state lawmakers gnashing their teeth as they struggle to balance their state budgets. The inability of states to collect sales taxes on most internet sales stems from a 1992 Supreme Court case — Quill Corp. v. North Dakota — that requires a business to have a physical presence in a state in order for it to be required to collect sales taxes. With e-commerce making up a growing percentage of sales, states will continue to see a big hole in their sales tax receipts as internet transactions continue to rise.

Recognizing this situation, New York passed a law in 2008 (dubbed the Amazon Law) that compels companies who operate affiliate programs within its borders to collect sales taxes. Affiliates — such as newspapers, bloggers, and other companies with a web presence — receive commission for posting links on their websites that viewers click to access online retailers’ websites. If online retailers generate more than $10,000 in yearly sales through these affiliates, then the Amazon Law requires them to collect taxes on all of their sales, not just the $10,000 generated through the affiliates. So far, this law has resulted in tens of millions of sales tax revenue.

The benefits of such legislation don’t stop with sales tax revenue, either. As the prices for online products adjust to reflect the additional tax, local bricks-and-mortar enterprises enjoy a boost to their competitiveness. Goodbye, price advantage for Washington-based Amazon; hello, normal prices at Minnesota-based Majors and Quinn. Suddenly your prices seem . . . equal. Furthermore, because higher-income earners tend to comprise a higher proportion of online buyers, the regressiveness of the sales tax levels out a bit, as their newly generated sales tax revenue starts paying for many of the services provided by state and local government.

Minnesota considers expanding state sales tax

If you haven't heard, Minnesota is confronting a major budget shortfall. Legislators are debating how to restructure revenue and expenditures to balance the state budget.

28.6% of Minnesota's general fund tax revenue comes from the state sales tax. This morning's Star Tribune included a lengthy article about the potential expansion of the state sales tax. Talk is about expanding the reach of sales tax, not raising the sales tax rate. Currently, food, clothing, and most services are exempt from sales tax.

Interestingly, expanding the sales tax to food, clothing, and services could raise enough revenue to cover the state's $6.2 billion budget deficit. The MN Department of Revenue estimates the potential sales tax revenue to be $7.5 billion for FY 2012-2013. This breaks down to:

• Groceries: $1.5 billion
• Clothing: $639 million
• Services: $5.4 billion

Problem solved, right? But as we discussed in class, sales tax is considered a regressive tax. Low and middle income households spend a higher proportion of their income on goods and services. Also, many of the services that would be taxed are legal and professional services provided to businesses as inputs to their final products (which are then taxed again when purchased by the consumer).

Naturally, grocers, the Mall of America, lawyers, and advertising agencies are opposed to sales tax expansion. What do you think?

The Politics of Sales Tax Expansion: Michigan Confronts Yet Another Budget Shortfall

The sales tax is one of the most administratively feasible taxes to collect, but one of the least politically feasible to implement or expand. Everyone pays it, and many businesses are affected by it. This makes the political process of implementing a new sales tax or expanding an existing one a very challenging process.

An interesting example of this is in the State of Michigan, where general fund revenue has been in decline since 2000 . Last year, the state faced a budget deficit of $1.3 billion. While the federal stimulus package helped Michigan to patch some of its holes, budget cuts totaling $300 million were required. This cut was only the latest in a series of budget cuts dating back to 2002, ranging from cuts to prison funding to zoos, operas, state colleges, medicaid, crime laboratories, libraries, and day care programs.



Michigan, still facing budget shortfalls, is running out of things to cut, as state budget director Robert Emerson describes:

“The big difference here,” said Robert L. Emerson, the state budget director, “is that we have very little to fall back on. Michigan has already done a lot of the things that other states are only thinking about doing now. Every reserve fund in the state government has been drained long ago. Our rainy-day fund? There’s $2 million in there. That won’t last you 30 seconds."

Facing yet another budget deficit, this time a whopping $1.8 billion, the state is now debating an expanded sales tax to increase revenue. Governor Jennifer Granholm, a Democrat, is seeking to expand the state's sales tax to cover services, which are not currently taxed. Doing so would help modernize Michigan's sales tax structure and raise $1.8 billion in new revenue--exactly the amount of the current budget deficit.

Granholm is term-limited, and thus doesn't have an election to worry about when promoting an expanded sales tax. In order to sell the tax, Granholm is promoting a reduction in the sales tax rate (from 6% to 5.5%) and removal of a business surcharge tax. The Governor argues that the additional revenues are necessary to prevent additional cuts to state education funding. Nevertheless, the proposal to expand the sales tax faces strong opposition. Republican legislators are adamantly opposed to the sales tax expansion, and instead have proposed another round of budget cuts totaling $800 million. But Granholm is firm in her position; when asked about the opposition to the tax proposal and her declining favorability poll numbers, she responded:

"It doesn't matter. I'm not running again. ... This is the right thing for Michigan"

-Group 1

A Fresh Look at Federal Taxation?

A few years ago an interesting, but improbable idea for tax reform was discussed during the presidential primaries. It has been labeled the “fair tax,” and proposes replacing all existing federal taxes with a single federal sales tax on all final goods and services. It also includes several related tax policies. Its proponents cite many benefits of this tax system, including:

• Making taxation more transparent. With a single uniform tax, Americans will have a clearer idea of what they spend on taxes, and how the effective tax rate is changing over time. This should result in greater government accountability.
• Reducing public and private tax administration and collection costs. The Government Accountability Office estimates that Americans spend between $200 and $300 billion each year complying with the federal tax system. That is between two and five percent of GDP! Relying only on a sales tax could reduce these costs substantially, considering that transactions increasingly occur at large retailers with automated payment systems.
• Allowing collection from all American consumers. The fair tax would collect from all consumers in the country, regardless of nationality, citizenship, or country of residence.
• Incentivizing “societally beneficial” spending behaviors. The fair tax would influence the spending decisions of the wealthy Americans. The fair tax will be a disincentive to spending money on “additional” consumer goods at the margin of benefit. Conversely, they will choose to invest in job creating companies, finance research and development, and donate more to charities and non-profits—all of which improve others’ standard of living.
• Increasing the global competitiveness of companies operating in the United States. The elimination of all corporate taxes will encourage companies to keep their most important functions domestic. It will also encourage foreign companies to move production to the United States. The United States currently has one of the highest corporate tax rates in the world.
• Making it easier to save. Currently, the American private savings rate is an abysmally low 4.6 percent, and was negative only a few years ago. The fair-tax will help Americans prepare more quickly for retirement and unexpected expenses. Additionally, increases in savings will lessen the strain on our already stressed social welfare system.

The fair tax need not be regressive

After learning more about the fair tax, many of my initial objections to it disappeared. Critics of the fair tax incorrectly label it as regressive, suggesting that it taxes those with lower incomes at a higher rate than those with higher incomes. In reality, the fair tax incorporates a “prebate.” Every taxpayer will receive a monthly rebate equal to the amount of sales tax that they will pay on purchases below the poverty level. The result is that those living below the poverty level will pay no net taxes. Additionally, the fair tax would eliminate the regressive FICA payroll tax that is currently paid by low-income Americans.

Many current sales taxes often excludes categories of products like food for home consumption and prescription drugs to give the appearance of “progressivism.” However, economists have found that the wealthy often spend a great deal more on unprepared foods and medical care (i.e., they are normal goods), and the positive intentions of these exemptions are often lost. Exemptions are not a particularly effective way to make the sales tax less regressive, and the practice results in market distortions that favor certain industries over others (benefits for food producers, pharmaceutical companies, etc.). The fair tax would eliminate these types of distortions.

Reliance on a sales tax will not increase instances of tax dishonesty

Few people realize the magnitude of uncollected taxes today. The IRS estimates the current tax gap (the amount that goes uncollected) to be nearly $300 billion per year. There is also not a strong likelihood of increased “underground” sales. Retail businesses will collect the tax at the point of sale, like they already do effectively in 45 states.

With the simplified system, the federal government will free up many resources to pursue tax crime and investigate fraud.

Implementation of the fair tax is not unfeasible

Adopting the fair tax will necessitate a constitutional amendment, requiring the approval of 37 states. It would include a repeal of the sixteenth amendment, which authorized the income tax.

Researchers estimate that sales tax will need to be around 23 percent to maintain current revenue levels. However, this is difficult to confirm due to difficulties in modeling.

Revenue stability is a concern with a sales tax. However, consumption is typically a more stable source of income than revenue, which is the current income tax base. Additionally, the fair tax is only currently being proposed at the federal level, meaning that a balanced budget is not required.

It is difficult to say how politically feasible the fair tax is. The mere mention of changes to the existing tax structure brings about strong emotion-laden responses. However, the plan should be carefully evaluated. Objections must move beyond “this isn’t how it’s been done before” for the study of public policy and administration to be useful.

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Sales Tax Chicago Style

When I moved to Minneapolis from Chicago in the summer of 2008, I was relieved to bid farewell to what had just become the nation’s highest sales tax:  10.25% (which applies to all items, even clothing.  Food is taxed at 2.25%).  July’s 1% jump from 9.25% was projected to bring in an additional $426 million to help patch Cook County’s budget deficit.  As one might expect, local shoppers and business owners alike objected to the hike and many feared/threatened to take their purchases across the border to Du Page County, where sales tax was just over 7%.  Neither group was as sympathetic to out-of-towners, however, with Michigan Avenue shops enticing tourist by touting their rates as a bargain – compared to Europe. 

Throughout the eighteen months that I’ve enjoyed tax-free retail, Chicagoans have endured not only the increased out-of-pocket expense but also the nausea-inducing drama of county politics at impasse.  In December, after months of debate and just before an early-2010 primary, Cook County Board President Todd Stroger saw the repeal of 0.5% of his increase as commissioners finally overturned his veto on their fourth try.  What made the difference on the fourth try?  A new state law lowering the number of commissioners required to overturn a veto from 14 to 11.  In January, a lone commissioner was left hanging after not a single colleague seconded his motion to repeal the remaining 0.5%.  Earlier this month, voters sided with the commissioners when they selected all three Democratic candidates ahead of Stroger.  If elected, new nominee Toni Preckwinkle vows to repeal the remaining 0.5% of the sales tax increase.    

One of the reasons the penny-on-the-dollar sales tax has landed so much airtime is no doubt the conflicting arguments between Stroger and the pro-tax-repealers.  Stroger maintains that the revenue is crucial to continue funding public health care and suggests that those against the tax represent higher-income wards.  Some opponents point out that sales tax’s regressive nature effectively works against lower-income residents; others demand government reform and improved efficiencies.  

  

If Cook County is really concerned about supporting the lowest-income residents, it should consider exempting necessities in order to reduce the tax’s regressivity, as we do here in Minnesota.  Simply raising – or lowering – the sales tax in unlikely to attract any Chicago compromises.

   

An internet tax?

Currently states are prohibited from imposing taxes on internet sales if the business providing the good does not have a physical presence in the state. For state sthis can mean a significant loss in revenue. California estimated that it lost $208 million in sales taxes to internet sales in 2003; Michigan points to the internet for a loss of $345 million in 2005, while South Carolina says that it loses $40 million annually to purchases by residents of items over the internet This is based on a 1992 United States Supreme Court case, Quill Corp v. North Dakota. In that case the Supreme Court found that while it was clear that Quill, an office supply company with offices and warehouses in Illinois, California, and Georgia-but not North Dakota-did significant business by mail order in the state and benefited from the state’s efforts at business climate and waste disposal (think lots and lots of catalogs decomposing in landfills) the fact that it did not have a physical presence in the state was sufficient reason for North Dakota to not be able to tax purchases by North Dakota residents from Quill. The Court however did indicate that Congress could change this current limitation on the taxation of interstate commerce if the taxation met tests on the burden imposed on retailers ability to properly determine and administer the applicable tax.

In March of 2000 the National Conference of State Legislatures convened what has become the Streamlined Sales Tax Project (SSTP) . The goal of the Project is to create an agreement among states to “simplify and modernize sales and use tax administration” such that out of state retailers can be required to impose the appropriate sales tax. Currently 22 states are participating, representing 31% of the U.S. population. Wisconsin has recently applied to join.

The Project, and the Agreement it has created, works to develop greater uniformity and simplification in tax base definitions, rates, tax returns, and perhaps most importantly sourcing rules.

One critical dimension to apply sales and use taxes to out of state purchases is determining which states’ taxes should apply to the purchase-the state of origin (where the retailer is located) or on the state of destination (where the purchaser is located). The SSTP has a significant issue paper arguing that destination taxes are preferable to origin taxes providing there is greater uniformity of definition of items to be taxed and that only sales over a certain dollar threshold are taxed. Additionally they argue that the important act in the sale is in fact the use of the item rather than the sale of the object by the business.

In addition they argue practical consideration in the implementation of origin taxes. They argue that origin taxes would have an unintended consequence of impacting business location decisions, driving businesses with significant remote sales into states with lower sales taxes.

Simplification however isn’t always so simple. In Minnesota food is nontaxable, unless it is classified as prepared food. Food that is created at the same site where it is sold is generally classed as prepared food. At one point, due to that definition stemming from Minnesota’s participation in the SSTP, it meant that a loaf of bread sold in a bakery was considered a taxable item but that same loaf sold by a grocery store was not. Similar confusion revolved around the definition of prepared meats sold in the meat market versus those same meats sold in the meat department of a grocery store until legislative action exempted those items from taxation.

Given the number of states currently facing budget deficits, and the continuing growth in internet commerce interest in taxing interstate, internet sales can be expected to grow.

States Yearn to Collect Online Sales taxes http://news.cnet.com/States-yearn-to-collect-online-sales-taxes/2100-1028_3-5672198.html, downloaded February 27, 2009
http://www.streamlinedsalestax.org/index.html, downloaded February 24, 2009
http://www.streamlinedsalestax.org/issue_papers.html, downloaded February 24, 2009

Legacy Amendment

On November 5th, 2009, Minnesota voters approved a general sales use tax levy of 3/8% known has the Clean Water, Land and Legacy Amendment, a levy which will be in effect for twenty-five years. The following was the ballot question, which further explains the intended uses of the funds:

"Shall the Minnesota Constitution be amended to dedicate funding to protect our drinking water sources; to protect, enhance, and restore our wetlands, prairies, forests, and fish, game, and wildlife habitat [33%]; to preserve our arts and cultural heritage [19.75%]; to support our parks and trails [14.25%]; and to protect, enhance, and restore our lakes, rivers, streams, and groundwater [33%] by increasing the sales and use tax rate beginning July 1, 2009, by three-eighths of one percent on taxable sales until the year 2034?"

The tax is projected to raise approximately $275 million in FY 2011.

The debate of the measure was interesting in that it was not just debating the merits or needs of the funded areas, but also the fundamental idea of constitutionally earmarking a revenue source for specific uses. The Star Tribune op-ed pieces provide two (opposing) sample view points:

The latter piece (Morse) advocates for the amendment based on merits, while the former (Johnson and Gilje) criticizes it for its effects on representative-democracy. The writers believe that passing such an amendment, regardless of merits, will become a slippery slope for voters who will be faced with similar such measures in the future, which will skew the work of the legislature in developing priorities:

“Lawmakers always are faced with demands that vastly exceed revenues. They assemble every two years, with a budget recommendation from the governor. They debate, they change, they add, they subtract. They work on the tax and fee side, they work on the spending side, and ultimately they enact a two-year budget. Not satisfactory to everyone by any means, but it's representative democracy. The alternative represented by the amendment is to select a few functions for favored treatment, without determining if they are more important than others, and to guarantee them a special piece of the revenue pie, via the Constitution, thereby keeping the governor and Legislature, our elected representatives, out of the process.”

Removing the merits from the debate, the point of the detractors is understood. Further, if something potentially unpopular, like offender re-entry programs, where placed on a ballot for funding, their viability would be dashed. Without an elected body to make difficult decisions relative to others, important priorities may fall by the wayside. The issue with the Legacy Amendment is not the causes to be funded nor even the sales tax levy itself, but the decision making process irrelative to other needs. Maybe.

Why Broadening the Sales Tax May Reduce Future State Budget Swings

During the past ten years, Minnesota's budget has swung wildly between periods of feast and famine. In 1999, the long-term budget looked so rosy, that we provided significant tax cuts and tax rebates to Minnesotans. Just four years later, the state of Minnesota faced a $4.2 billion budget deficit, and engaged in soem of the biggest cuts to state government in recent decades: cuts that disproportionately hurt low-income and disabled Minnesotans. After roughly five years of general budget solvency, the economic downturn of 2008 again generated more bad news for the state, with significant (and growing) budget deficits projected for for the next two budget biennia.

How does this happen? And how is it relevant to the sales tax? The structure of the State of Minnesota’s revenue sources make it particularly vulnerable to changes in the economic climate. In fact, a recent Budget Trends Study Commission Report finds that Minnesota’s revenue stream is only getting more volatile over time. This is, in part, a result of Minnesota’s more progressive revenue system. Minnesota generates 48% of its general fund revenue from the state income tax, a very progressive, but also volatile tax (see graph). That is, when times are good, Minnesota generates a LOT of revenue. When times are bad, people make less money, pay fewer income taxes, and the state ends up in a mess.

Correspondingly, the state’s general fund revenue base relies less heavily on more stable forms of revenue, like the sales tax. This is, in part, because Minnesota hasn’t historically relied on regressive taxes like the sales tax, exempting things like food, clothing, and medical costs from taxation. However, this lower reliance on sales tax revenue is also due to the US economy’s shift from a manufacturing base to a service base, reducing the number of transactions subject to sales tax and, over time, eroding the adequacy of Minnesota’s sales tax revenue (from 33.3% of general fund revenues in 1970 to 28.5% in 2006).


In part as a result of this combination of circumstances, budget-related panels appointed by Governor Pawlenty and the legislature, as well as some think tanks (both local and national) have suggested a switch from the current, narrow sales tax structure, to a new, broader structure that taxes more goods and services at a lower rate. By expanding the sales tax to include more services and potentially, more goods (such as food and clothing), we could both reduce the overall rate of sales tax while helping to stabilize Minnesota’s general fund revenue sources. While some may argue that this increases the regressivity of Minnesota’s revenue system, it also stabilizes the state budget, thus better ensuring the long-term sustainability of state programs that assist low-income and vulnerable Minnesotans.

Federal Sales Tax and Abolishing the I.R.S.

Recently a House of Representative member introduced a bill for a national sales tax and the end of the federal income tax, and I.R.S. The bill sets forth a proposed sales tax of 23% on all goods sold, no exceptions. There are many interesting points in this bill. Many of the claims that they list as negatives of the current income tax seem to be present in their version of a sales tax. They claim the federal income tax is too intrusive, yet the bill requires mandatory annual registration of all individuals in every household for any monthly refund and it also requires a separate form to be sent to Social Security office stating a persons income (I assume having the Federal Government know your income is why they thought it was intrusive on individuals privacy). In a list of grievances of the Federal income tax they claim that it "hides the true cost of government by embedding taxes in the costs of everything Americans buy", how a sales tax would be any different is not exactly clear. They claim that the federal payroll taxes, medicare and social security have a "have a disproportionately adverse impact on lower income Americans" while leaving out the regressive nature of sales taxes, especially one as broad as a Federal Sales tax.
There are also a few tidbits which were probably added for specific lobbies, such as the ability for the Social Security office to use "Smartcards" that in doubt are laced with hidden fees. It should also be noted that the authors put collection and enforcement at the state level and will charge the Federal government only a "reasonable administration fee". While a debate on the merits of both system would be interesting, a partisan filled bill hardly accomplishes anything.

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?