Sugary drink tax prepares to bubble into Capitol conversation

CHARLESTON, W.Va. — Last year, as West Virginia lawmakers struggled to settle on a budget, they bumped the tax on tobacco products from 65 cents to $1.20 a pack, bringing in an estimated $100 million in new revenue.

This year’s potential go-to tax, bobbing along in the background as lawmakers discuss more ambitious tax reform, is a tax targeting sugary drinks.

Advocates for the tax say it would encourage healthier choices and cut health care costs. They say it’s a tax based on people’s choices that could raise $89 to $128 million a year for lawmakers to put toward the half-billion budget gap for the coming fiscal year.

Opponents say there’s already a beverage tax in West Virginia, that the tax is regressive and that government shouldn’t have a role in intentionally affecting consumers’ choices.

Republicans like Senator Ed Gaunch, R-Kanawha, say there’s not a lot of use debating the matter.

“No, there’s no appeal,” Gaunch said one day last week while walking through the Capitol. “Is there good reason to be for it? Sure. But it has no chance, so I’m not going to waste my energy.”

That could change if legislators struggle to agree on a strategy for closing the budget gap.

The House and Senate are focused on closing exemptions to the state’s sales taxes — particularly loopholes for services — and broadening the tax base.

The Senate is taking that a step further by considering legislation that would eliminate the state income tax and, possibly, make up the difference with a broad consumer sales tax.

Gov. Jim Justice, meanwhile, favors $450 million in “revenue enhancements,” mostly achieved through new or increased taxes.

The biggest chunk in Justice’s plan would be a new commercial activities tax. The proposed tax of two-tenths of a percent on gross revenues would be estimated to raise $214.3 million.

The sugary drink tax, so far, isn’t in anyone’s plan.

But if the House, the Senate and the governor can’t agree that could change, suggested Christine Compton, government relations director for the American Heart Association.

“It’s a revenue generator, but it’s one of those things we saw like the tobacco tax. At first there was no appetite for that. No one wanted to raise taxes,” Compton said in an interview at the Capitol Rotunda. “But this is about an excise tax for consumers who choose to buy these products. So you don’t have to pay this.

“Whereas with a consumer sales tax that’s being talked about, everyone is going to pay that. So it’s much more regressive versus this type of excise tax that’s only on a product you can choose to use or choose not to use.”

The sugary drink tax is a pretty self-explanatory term for what this would be. The amount being proposed is 2 cents an ounce.

“Anything that has significant sugar content – so we’re talking sodas, energy drinks, sports drinks, bottled drinks that have a significant amount of sugar. So things that are a mostly-milk product, a hundred-percent juice product and waters would not be taxed,” Compton said.

“Diet drinks would not be taxed. But anything with that non-nutritive sugar content — because we know that Americans are getting a significant amount of sugar in their daily diets from sugary drinks.”

Compton and the American Heart Association are talking up the tax at the Capitol as much as they can.

They cite a public opinion research poll conducted for the American Heart Association by Ferguson Research that concluded that 53 percent of voters would support the sugary drink tax to improve public health and 60 percent support it to help with the budget shortfall.

“We’re obviously trying to create interest,” Compton said. “This is a very new issue for us, and we realize that. It’s really time to think about West Virginia being first instead of last, and we could be the first to do this.

“If we don’t have a healthy workforce, then what are we going to do if we don’t have people who are healthy enough to do those jobs?”

On the opposite side of the issue is the West Virginia Beverage Association. Its legal counsel, Will Swann, is also at the Capitol to tell lawmakers it’s best for the government to stay out of people’s grocery carts.

“West Virginians already pay an excise tax on soft drinks to the tune of a penny per 16.9 fluid ounces. That money in the form of $15 million give or take, every year, benefits the West Virginia University Medical School,” Swann said.

The beverage association feels as if its products are being unfairly targeted as causes of obesity in West Virginia when the bigger picture is more complicated, Swann said.

“There’s no one item that makes people obese. It’s a matter of genetics. Its’ a matter of overall diet and activity level. We feel like we’re being singled out and compared to cigarettes, which is fundamentally unfair,” he said.

“The difference between a ginger ale and cigarettes is that if your child is sick and was dehydrated, you’d give your child a ginger ale and you’d be pretty glad to have them drink it.”

The beverage association also makes an economic argument against the sugary drinks tax. Swann says that’s one of the reasons he thinks support won’t grow.

“I don’t see opinion changing dramatically, at least with respect to this tax,” he said. “The tax is bad public policy because it’s regressive. When we categorize something as regressive it means this tax impacts poor folks more than it affects the wealthy, and that’s bad public policy.

“These lower-income folks have to pay a larger portion of this tax to buy common grocery items.”

Targeting sugary drinks for taxes is a debate that extends beyond West Virginia’s Statehouse. The Urban Institute explored the issue with mixed conclusions.

Yes, reducing intake of sugar is a lifestyle improvement, its analysts wrote. But such taxes are regressive. “A final concern, beyond the scope of our report, is whether taxing sugar is an appropriate role for government,” the Urban Institute wrote.

Jason Huffman, director of Americans for Prosperity, West Virginia, lobbies for limited government and lower taxes. He said he would argue against the sugary drink tax, just as he did last year’s tobacco tax increase.

“There is a strong emotion within the House and Senate to limit government,” Huffman said. “We saw last year there was a tax hike on tobacco. That was last year. We’re still in a budget deficit. It didn’t fix anything. And so we have to limit that structure.”

That won’t stop Compton for making her pitch around the Capitol for the sugary drink tax.

“It’s a tax that keeps on giving because in addition to the revenue it generates – anywhere from $89 million to $128 million per year – we’re also talking about health care cost savings of anywhere from $8 to $16 million per year,” she said.

“As decrease of sugary drinks goes down, we also see an increase in water consumption and healthier products go up. We’re not talking about loss of revenue. We’re talking about switching products. We want people to reduce sugary drinks consumption and make healthier choices.”

A load of soft drinks is moved through the Rotunda area at the state Capitol.

 





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