Summit Brewing founder and President Mark Stutrud says his business could be on the line if the alcohol excise tax passed by the Minnesota House becomes law. MPR Photo/Mark Zdechlik

A bill passed by the Minnesota House that would increase taxes on alcohol has the hospitality and alcoholic beverage industries in an uproar.

Supporters of raising the excise tax on alcohol say it's long overdue and the state could bring in $200 million a year if people paid just seven cents more per drink. Alcoholic beverage producers pay the excise tax.

Supporters say those producers could recoup the expense by passing it along to their customers. They call it a user-fee that the vast majority of Minnesotans would hardly even notice.

Opponents say that argument misrepresents what will really happen if the tax goes up. Summit Brewing founder and President Mark Stutrud said his business could be on the line.

"Taxation could not only stop our growth but maybe eliminate our existence, and that's not an exaggeration," Stutrud said. "I'm just saying the facts."

Stutrud said if the House bill becomes law, Summit's state excise tax will jump to nearly six times what it is now. He said he'd pass the extra cost on to his wholesalers, who would pass it on to retailers. He said they'd then tack on their margins and that customers buying a glass of beer at a bar or a six pack at a liquor store would pay a lot more than seven cents more per drink.

"It's highly misrepresented," Stutrud said. "It doesn't reflect what actually happens in the marketplace and the biggest disagreement that I have with this whole positioning is that it's sneaky."

State House Tax Committee Chair Rep. Ann Lenczewski says if businesses that sell alcohol choose to pass along more than the amount of the excise tax hike, they, not state lawmakers, will be to blame for dramatic price jumps.

"If the folks involved in the liquor industry want to get a little profit off their customers because they're hiding behind a user-fee that hasn't been raised in 26 years, I think you need to ask all of them why they're choosing to go after their customers because that's not required in the law," she said.

Tim Mahoney is one of the owners of the Loon Cafe in downtown Minneapolis. He calls an alcohol tax proposal at the State Capitol "ridiculous." MPR Photo/Mark Zdechlik

At many taverns and restaurants in Minnesota, new posters with bright red block letters urge drinkers to speak out against higher alcohol taxes.

Although Lenczewski and other supporters of the increase say it would amount to about seven cents a drink, the poster warns a case of beer will cost $3-$4 more, even though 7 cents times 24 bottles equals less than $2.

At the Loon Cafe in downtown Minneapolis, patron Sean Harrison of St. Paul was surprised to hear about the proposed tax increase.

"I knew about the tax hike on tobacco, but I had no clue about the take hike on alcohol," Harrison said.

And Harrison who works as a bartender at a different establishment, said making alcohol more expensive will cut into his livelihood.

"People will still come in but they'll have less," Harrison said. "They'll come in later and leave earlier."

Tim Mahoney, one of the owners of the Loon, calls the alcohol tax proposal "ridiculous" and predicts significant increases in drink prices if it becomes law. He said smaller bars and restaurants in less prime locations than his could be forced out of business.

"I have a shiny new ballpark behind me, 365 steps behind me, that makes up for a lot of ills," Mahoney said. "I'm going to survive. But you're going to come in here and you're going to be paying a significant lot more."

HEALTH WORKERS SUPPORT HIKE

People who work in the alcohol and chemical dependency treatment field would welcome the price increase.

Ellie Skelton, who runs a women's treatment center in St. Louis Park, said she and others would prefer that proceeds from the tax increase were dedicated to offsetting the billions of dollars in costs associated with alcohol abuse.

"I would hate to see this just go the general fund. This would be a user fee and it should go to pay for the cost of alcohol in Minnesota," Skelton said.

The Minnesota Department of Health estimates that cost at more than $5 billion a year.

Although the billed passed the House its future is uncertain in the Senate where the DFL majority leader says there is not as much support for increasing taxes alcohol as there is for bumping up the tobacco tax. Sen. Tom Bakk of Cook also said he thinks the tax would cost consumers more than seven cents a drink.