Proposed tax could drive up milk prices

ST. PAUL (AP) — A blink-on tax on milk wholesalers could save Minnesota’s small dairy farms from extinction say lawmakers pushing for a surcharge of up to 24 cents a gallon.
Rep. Steve Wenzel’s plan would tax wholesalers up to 6 cents a quart when the price paid to farmers falls below $15.50 per hundredweight (about 11.5 gallons.)
“This bill may be the last chance to save the Minnesota dairy industry,” said Wenzel, DFL-Little Falls, sponsor of both this year’s legislation and the 1993 bill.
But critics say retail consumers will end up paying to prop up the price farmers get, and they point to the state’s 1993 experience with price supports as evidence.
Wenzel and others say deregulation of federal pricing formulas, which should help Midwestern dairy farmers, appears to be at least a year away. In the meantime, Minnesota could lose hundreds of small operations that can’t compete with large producers.
“Nothing else out there is going to give anyone any more help on the bottom line,” said House Majority Leader Ted Winter, DFL-Fulda. “If we don’t (pass this), we might as well turn it all over to the big boys.”
Farmers would get $22 million to split among themselves. The average farm would get $12,000 a year, but small dairy operations would get proportionally more aid than large ones.
The courts threw out the 1993 plan because of the way the state collected and distributed the money. Supporters believe they’ve corrected those flaws.
But while that plan was in effect, milk prices shot up in stores around the state, and critics of the current proposal say it will happen again.
“It’s going to get passed on to consumers,” said Nancy Christensen, executive director of the Minnesota Grocers Association.
That’s not the intention, said Wenzel.
“The processors are greedy. They’re making record profits, and they could eat this and still make their record profits,” he said.
But even if the tax were to get passed on to consumers, Wenzel doesn’t think Minnesotans would mind.
“The consumers of Minnesota are not against paying a few more cents per quart if they knew that money was going to the farmer,” he said.
Customers at a St. Paul supermarket agreed to a point.
“I don’t mind helping them, but I think that’s a little exorbitant,” said Linda Hendrickson. The St. Paul mother of three says her family can go through four gallons a week.
“I could buy a cow,” she said.
“I’d love to boycott it,” said Doni Jo MacBeath, another mother of three. “But you have to buy milk if you have kids.”
Lawmakers seem to be less willing to approve price supports than in 1993, when the bill passed with little opposition.
The plan seems to be running into trouble in the Senate where the chief sponsor is considering changes.
Sen. Becky Lourey, DFL-Kerrick, said one possibility is to cap the assessment at 2 cents per quart.