Count out the West Virginia Beverage Association on Gov. Jim Justice’s big tax proposal.
“The large tax increases in the governor’s plan would hit hard-working families, small businesses and their employees the hardest just when they are struggling to get through a historic economic downturn,” said Larry Swann, president of the association that represents soft drink companies.
The association has been against the governor’s tax proposal since he described it during his State of the State address a few weeks ago. Details became available this week when the Governor’s Office released a 78-page draft of his tax bill.
Governor Justice proposes cutting income taxes by 60 percent starting Jan. 1, 2022. Longer term, he envisions fully eliminating the personal income tax and says population growth will accompany that.
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An outline of the governor’s plan estimates tax reductions totaling $1,035,650,000 and rebates totaling $52 million — but also tax increases of $902,600,000 to make up for most of those breaks. The increases include pushing the consumer sales tax from the current 6 percent up to 7.9 percent.
A portion of the tax increases would apply to the beverage industry.
For many years, West Virginia has applied a tax on soft drinks amounting to a penny per 16.9 fluid ounces. That adds up to about $15 million to benefit the West Virginia University Medical School.
Starting next Jan. 1, Justice proposes to increase the tax — expressed in different ways, depending on how the beverage is produced or sold.
- 6 cents per 16.9 fluid-ounces beverage
- a tax of $4.80 on each gallon of soft drink syrup
- 6 cents for each 28.35 grams of dry mixture.
About the same amount of money as before would continue going to the WVU Medical School, with the rest going to the state’s general fund.
State officials anticipate bringing in about $62.5 million from the tax increase on soda pop.
In 2017, the governor and some legislators proposed a complicated plan that would have eliminated the income tax while raising other taxes. At that point, the “sugary drink” tax was part of public conversation but was not a step lawmakers said they were taking seriously.
Now the proposal is right in the mix.
During a town hall discussion of the tax proposal on Friday, a resident identified as Dave in Wheeling asked about consumer habits: “How can you expect border cities and counties to compete with a raise in the sales tax.
Justice responded by saying businesses that sell soft drinks will benefit from the increased population that he foresees from the income tax cut.
“People are going to come to the border counties to live. And it’s going to be substantial,” Justice said. “From the standpoint of our retailers, do you not think that if we move up 20 percent in population that we will not have so many more opportunities for purchases here in West Virginia, for business opportunities here in West Virginia.”
The governor continued, “Just think of the argument of this: We’re going to raise the soda tax 5 cents. It hasn’t been raised since 1952, almost 70 years. We’re going to raise it five cents. Dave, do you truly believe that if we raise the population in your border county by 20 percent that you’re going to sell more or less soda pop in West Virginia. There’s no argument here. There is no argument.”
The libertarian-leaning Cardinal Institute think tank in Charleston issued a statement last week declaring, “Soda taxes proposed in West Virginia are regressive.”
The institute, which generally favors the income tax cut, concluded that increasing soda taxes to make up the gap is a bad idea. “Creating a tax to deter behavior creates a very high rate on a narrow tax base. This affects low-income individuals at a disproportionate rate,” the institute wrote.
Swann of the Beverage Association agreed.
“We need to relieve burdens on our local small businesses and families so they can recover, not add to their burdens with a regressive tax that hikes beverage prices as much as 500 percent and a state sales tax that would be the highest in the country.”