Governor proposes beer tax increase; names WVABCA Commissioner

Seeks 45% hike in beer excise tax

As part of his recently announced revenue enhancement proposals, West Virginia Governor Jim Justice proposed a liquor and  beer tax hike that would produce $5.6 million in increased revenues. The governor did not propose any business enhancements or other regulatory relief for beer and liquor manufacturers, distributors, or retailers that would make their businesses more competitive and successful in the state.

Reportedly, the governor’s proposal would increase the state’s beer excise tax (barrel tax) from $5.50 per barrel to $8 per barrel. They say this would bring in about $2.8 million annually in additional revenue. Brilliant Stream estimates this would increase the cost of a pint at a tavern by about a nickel or more and the cost of a six-pack at retail by about 10 cents.

The $2.50 per barrel increase, which amounts to a 45.5% increase in the tax rate, seems rather steep for a one-time jump. If the governor’s proposal is adopted, WV’s beer excise tax would be considerably higher than all but one of the surrounding states.

For comparison, here are the gallonage tax rates in surrounding states (taken from Brewers Association data).

• Kentucky – $2.50 per barrel
• Maryland – $2.79 per barrel
• Ohio – $5.58 per barrel
• Pennsylvania – $2.60 per barrel
• Virginia – $7.96 per barrel

The $2.8 million annual tax increase would be passed on to beer consumers plus an increased amount for wholesaler and retailer mark-ups. West Virginia beer consumers could easily get stuck with $5 million of additional costs per year.

The governor’s proposal would dedicate the revenue generated by the beer and liquor tax increases to tourism promotion. It’s hard to understand why West Virginia residents who purchase their beer and liquor here should be singled out to pay for tourism advertising. If you must have an excise tax, why not invest it to help the brewery industry grow?

Why hamper a rare economic bright spot?

Tax policy experts generally recognize that excise taxes are unfair and bad for employment because they force more of the tax burden on a single industry, making it less competitive and more difficult to achieve profitability. A 5,000 barrel-per-year local brewery would pay $12,500 more in excise taxes each year — money it couldn’t then use to purchase more equipment or hire another employee.

Over the past decade, the small brewery and small distillery industries have been one of the few bright spots in the state’s sagging manufacturing sector. It seems counter productive to penalize them when they have been on a growth spurt producing new jobs and income for West Virginia communities and bringing more tourists into the state. The governor also proposed other broad business tax increases which would apply to breweries distilleries, alcohol wholesalers, and retailers alike. The combined effect would certainly be increased retail prices for consumers and possibly less sales for beer and distilled spirits.

Liquor cost would increase too

On distilled spirits, the state would raise its wholesale mark-up from 28 percent to 32 percent to produce $2.8 million in additional revenues annually. Retailers would raise their bottle sale price by the increased wholesale cost plus add their retail mark-up to it.

Wooten named WVABCA Commissioner

In other state alcohol news, Governor Jim Justice has announced that Fred Wooton has been selected as the new commissioner of the West Virginia Alcohol Beverage Control Administration (WVABCA).

Wooton has been with the WVABCA for more than 25 years serving in a variety of roles including as an Inspector, Enforcement Agent and Enforcement Supervisor. He has instructed officers and cadets at the West Virginia State Police Academy on Alcohol Beverage Control laws, rules and regulations since 2004, and for a several years, Wooton has served on the Policies and Procedures Executive Committee at WVABCA.

Prior to joining the WVABCA, Wooten worked about 12 years in the lodging, food and beverage industry in southern West Virginia. He is a younger brother of former WV State Senator Bill Wooton.

“After more than 25 years with the ABCA, the Governor’s expression of confidence in me is the highlight of my professional career,”  Wooton said. “I am truly humbled and grateful to have been selected by Governor Justice to serve as Commissioner of the West Virginia ABCA. Like all West Virginians, I am aware of the significant financial challenges we are facing. Because of Governor Justice’s leadership, I am confident that better days are ahead and we are prepared at the ABCA to do our part to help him turn this state around.”

Parts of this article were sourced from news releases issued by the Governor’s Office.