Discussion of Sin Tax Dominates Smith’s First Town Hall Meeting

Senator-at-Large Brian Smith listens to citizens expressing their opinion at Friday's town hall meeting.
Senator-at-Large Brian Smith listens to citizens expressing their opinion at Friday’s town hall meeting.

A majority of those who spoke up at Senator-at-Large Brian Smith’s first town hall meeting on St. John on Friday were opposed to proposed “sin taxes” for the territory.

The proposed sin tax legislation (Bill 32 -0005), which is meant to address the territory’s fiscal crisis, includes an increase in excise taxes on tobacco, alcohol and soda. It also calls for the creation of a daily fee for timeshare occupancy.

The sin tax isn’t all that was discussed at Smith’s two hour meeting with St. John residents in the Cleone Henrietta Creque Conference Room at Cruz Bay’s Legislature Annex. Attendees also expressed concerns about the closure of St. John’s public library, the conditions of the Cruz Bay cemetery, and perennial St. John issues such as property tax assessments and the role of the National Park.

But the most passionate exchanges of the evening occurred when members of the Cruz Bay business community questioned Smith on his position on Bill 32-0005.

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Smith, who is new to the 32nd Legislature and ran unopposed for his seat, was among the senators who voted in favor of the sin tax bill in a Jan. 31 Finance Committee hearing. The bill is up for further discussion at a Rules and Judiciary Committee hearing scheduled for Wednesday.

On Friday, Smith’s defense of his vote echoed the discussion of the bill that occurred at the Finance Committee hearing at which it was approved.

Something needs to be done, Smith told residents, to ensure the government’s access to the bond market to keep services running. He said that the tax bill under consideration, though it might seem harsh, includes smaller increases than those in a previous bill proposed by Gov. Kenneth E. Mapp and voted down by the 31st Legislature in December.

“Originally what was proposed was some real draconian numbers. Nevertheless the numbers came down to something that would be a little more palatable. And that’s as much as I can say regarding that matter right now,” Smith said.

Residents involved in Cruz Bay’s crowded bar and restaurant industry, for whom the proposed tax increases on alcoholic beverages are particularly unwelcome, did not appear to be appeased by Smith’s words.

The version of the bill currently listed on the Legislature’s website calls for a $4 tax increase per case on imported beers per case, and a $4.50 tax increase per case on domestic beers. Tax rates would also increase for wine, liquor and carbonated beverages.

According to testimony offered at January’s Finance Committee hearing, such an increase would set tax on domestic beer, for example, substantially higher than in any U.S. state.

Richard Baranowski of the Lime Inn restaurant said Friday that the sin tax would cripple businesses already working on thin profit margins. He asked whether there were any alternative plans to help generate revenue by nurturing new industries or improving the territory’s tourism product.

“Is there a way we could go about it where instead of milking the cow to death, could we get another cow?” he said.

According to Smith, who throughout the meeting assured residents that he is friendly to business, he would not have supported Mapp’s previously proposed sin tax plan, calling it “catastrophic” and “a travesty.” He also said that when the territory’s fiscal crisis came into focus he had argued that leadership should come from the top, including a pay cut for the governor.

Smith said that although he doesn’t want to see “happy hour” turn into “sour hour,” the massive layoffs and government employee furloughs that would occur without increased taxes would have an even more devastating effect on the territory.

“We all know the government is in a serious predicament in terms of lack of revenues. The government of the Virgin Islands spends significantly more than they’re taking in right now,” Smith said.

Members of the business community responded with their concerns that there has been little talk of reducing spending, rethinking the policies of the Economic Development Commission, or better tracking instances where funds may be misappropriated or wasted.

“How much more do you think these businesses can pay before they go out of business? And they also have to pay rent, which has skyrocketed on St. John as you well know,” said resident Pam Gaffin.

Kurt Marsh Jr., a recently returned college graduate, said he was frustrated with the lack of opportunity for St. John’s young people, and called for visionary leadership to build opportunities beyond the tourism industry.

“I think the first thing the Government of the Virgin Islands could do is try to make people that live here happier,” he said.

Marsh challenged Smith to organize the people of St. John, and particularly the youth, into a movement that would take better advantage of the island’s greatest resource, which he said was its human capacity.

Bill 32-0005 lists the projection for revenue generated by its proposed “sin taxes” at $12.2 million per year. If the bill passes, those taxes would go into effect beginning on March 1.

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