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South Boston, Virginia Proposes Cig Tax to Fund Government Pay Hikes

August 14, 2018

The South Boston, Virginia City Council is considering levying a tax on tobacco sales in the city to fund pay hikes for city government employees and pad general revenue.

The South Boston, Virginia City Council is considering levying a tax on tobacco sales in the city to fund pay hikes for city government employees and pad general revenue.

The ordinance, proposed by councilwoman Tina Wyatt-Younger in May, would place a 10 cents per pack tax on cigarette vendors operating in the city. If enacted, businesses selling cigarettes would be required to purchase and display stamps noting the payment of the tax.

“I want to recommend Council implement a cigarette tax, with the money going to increasing the salaries for town employees, and also a portion going to general funding,” Wyatt-Younger said at a May 29 work session, according to South Boston Gazette-Virginian reporter Doug Ford.

The City Council decided on June 25 to delay voting on the ordinance until August, to allow more time to research the issue.

Socking the Poor

Caleb Taylor, director of policy at the Virginia Institute for Public Policy, says although the tax would be levied directly on business owners, low-income people would end up paying for it.

“Cigarette taxes, like other ‘sin taxes,’ only greatly affect one particular portion of the population; those in the lower echelon of the income scale,” Taylor said. “The people it’s going to most affect are the poor, because sin taxes are often regressive taxes, and the poor end up picking up the larger portion of paying the tax.”

Cheryl Deal, manager of the Blue Ridge Tobacco and Candle store in South Boston, says the ordinance is an unfair cash grab.

“They’re picking on one group of people,” Deal said. “If they were taxing the whole county or taxing an item the whole county uses, that would be fine. I think it’s wrong they treat people who smoke differently.

“You want to take money from these already struggling people?” Deal said. “Ninety percent of my clientele are either older people or people who live paycheck to paycheck, or on a fixed income, and you want to take their money and give it to government employees, who are already paid using our money? I can’t see the point in that.”

Found Plenty to Cut

Taylor says the city can increase pay for government employees without adding new taxes.

“They don’t need to put another tax in,” Taylor said. “They have plenty of income in revenue to find the funds without having to screw around with more taxes in their area. The best option is for South Boston to go through its budget and to cut out anything that’s not necessary I’ve gone through South Boston’s budgets, including 2017, 2018, and 2019, and there are a number of things that don’t need to be paid for by the city of South Boston or that could be run by other organizations easily and more efficiently.

“The necessary funding is easily found in their budget,” Taylor said. “All they have to do is be willing to move it.”

Business-Friendly Successes

Taylor says lawmakers in the city should learn from the success stories of other Virginia municipalities.

“I think the South Boston City Council needs to take some lessons from the Goochland County Board of Supervisors, because Goochland is now in the top three counties in terms of fiscal stability in the nation. They’re doing it in a way that it actually preserves the suburban feel in the county. Goochland has a massive surplus, and I think they have the lowest taxes in the state.”

The road to economic prosperity is paved with low taxes and spending reductions, Taylor says.

“South Boston should use the proven policies that other places in the state of Virginia have used to increase their tax base by having solid business communities and growing populations,” Taylor said. “By becoming more business-friendly, which brings both businesses and people in, that means there are businesses that need to hire people, which means people will want to move there for work, and when people get there they’ll have some place to work and have money to spend. … It’s a cycle. They should look into current programs to see if they’re working, and stop spending that money if they’re not.”

‘Government Out of the Way’

Taylor says getting government out of the way is the key to economic success.

“Generally speaking, towns like this have difficulty increasing per-capita income, usually because local government is in the way in one fashion or another,” Taylor said.

“Getting the city and local government out of the way will help this town in the long run actually accomplish the goals that they specifically say they want to accomplish,” Taylor said.

Predicts Job Losses

Deal says increasing tobacco taxes won’t reduce local smoking rates but will increase the city’s unemployment rolls.

“The tax would affect my business revenue, and I would have to let members of my staff go to make up for it,” Deal said. “Some of these businesses have been here for decades, and they will have to get rid of some employees because of the tax.

“The tax won’t reduce smoking,” Deal said. “My customers will go right down the street here and buy their cigarettes cheaper there, and I don’t blame them one bit. If I were my customers, I would go to the cheapest place I could, too.”