Is Excise Tax on Soft Drinks a Good Substitute for Income Tax?

In a March article published by the Tax Foundation, Ulrik Boesen, Senior Policy Analyst, Excise Taxes, at the foundation’s Center for State Tax Policy examined how US state lawmakers are considering increasing excise taxes on soft drinks to offset decreases in income tax.

This comes at a time when lawmakers are looking towards a post-pandemic world where taxpayer behaviour will not likely be the same as it was pre-pandemic.

‘It seems almost certain, for example, that the post-pandemic world will include more remote work opportunities, which will allow taxpayers more freedom to shop for competitive tax environments with less considerations of the physical location of their employer. In West Virginia, the only state to lose population over the past 70 years, several plans are in the works to reduce or even repeal the individual income tax,’ said Mr Boesen.

One of these plans involves increasing excise taxes on soft drinks by 600%, which would generate an estimated $62.5 million.