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The 2 soda taxes on the ballot failed to pass
Looks like New York City will continue to forge the lonely war on soda by itself, as the two soda tax initiatives on the ballot in California failed to pass.
Report the Huffington Post and the Los Angeles Times, a whopping 76 percent of the population voted against the soda tax in El Monte, Calif. In Richmond, Calif., 67 percent of the votes were against the ban. The votes may not be a total shock, considering how much money the beverage industry spent fighting the bills. HuffPo reports that the American Beverage Association (ABA) — an outspoken foe of the New York City soda ban and the proposed taxes — spent $2.5 million in Richmond, Calif., and $1.3 million in El Monte, Calif. (It was the most expensive campaign ever in El Monte, Calif.)
Many are disappointed that the soda taxes won't be put into effect considering the two cities' growing obesity rates; they are among the highest in all of California. Still, it looks as though the ABA will continue to dominate the war on soda — until they get to Bloomberg, of course.
When a City Passes a Soda Tax, Who Pays?
Two years after highly contested campaigns on both sides of San Francisco Bay, municipal soda tax initiatives are once again driving political debates in the Bay Area. In 2014, Berkeley, California, passed a tax, and a measure narrowly failed in San Francisco, where questions of class and the city’s high cost of living were at the heart of the “no” campaign organized by the industry-backed Coalition for an Affordable City.
Now, with Berkeley’s tax fully implemented and Philadelphia’s city council passing its municipal measure in June, the fight over Oakland’s soda tax proposal is heating up—and the central question of the debate has changed. The American Beverage Association, an industry trade group, has spent $747,267 on a campaign that has focused on the burden that small businesses would face if the measure passes—and on raising doubt over who would be taxed.
“Proponents call it a soda tax, but it’s really a tax on food distributors, including community grocery stores, and their customers,” reads a mailer sent out by the ABA-backed No Oakland Grocery Tax coalition. Ads that have aired on both local television and streaming services such as Hulu show store owners such as Temur Kwajha, owner of a halal market, scooping out walnuts for a customer and pulling long, blistered sheets of flatbread out of the oven—foods that would not be taxed if the measure passes. “The last thing Oakland needs is a tax on groceries,” he says. Soda and sugar-sweetened beverages are neither shown nor mentioned in the spot. The ads, and the insistence on calling the measure a grocery tax, led to a number of Oakland City Council members who support the measure to say last month that they will file a false advertising claim with the Federal Communications Commission and an ethics complaint with the city. (Neither claim has been filed yet.)
So who would be paying the tax? The simple answer is that, as is the case in neighboring Berkeley, beverage distributors would remit the tax to the city. That additional cost, however, would be passed on, as research on the taxes in Berkeley and in Mexico has shown, with consumers paying a higher price for a can of Coke or Sprite. But while taxing distribution companies—“big soda”—is easier to sell, politically, than a tax that voters themselves would pay, the design of taxes like Berkeley’s and the one being considered in Oakland not only assumes that costs will be passed on to consumers—it depends on it. When a Cornell–University of Iowa analysis of the effect of the Berkeley tax on prices found that the cost of soda had increased by half as much as was expected, the Cornell Chronicle reported that “the measure so far has fizzled.” Subsequent studies have found pass-through rates as high as 70 percent.
Unlike sin taxes for cigarettes, which create a disincentive through high prices alone (with around 3 percent of revenue spent on antismoking programs, according to a 2012 study by the Centers for Disease Control and Prevention), the decline in consumption from increased cost is seen as secondary to the public health programs the revenue will pay for in cities like Berkeley. (Philadelphia’s tax is foremost a tool for creating revenue, which is earmarked for funding the city’s universal pre-K program.) The estimated $1.5 million in annual revenue from the soda tax will be spent on nutrition programs in Berkeley Unified schools and on grants for local organizations working on public health issues.
Big Soda Fights Bay Area Tax Proposals
I f not here, where? On Tuesday, voters in the progressive California cities of Berkeley and San Francisco will decide on whether to tax sugar-heavy beverages like soda. Similar measures have failed in dozens of other cities, including reliably blue New York, and the association representing beverage giants like Coca-Cola and PepsiCo has donated more than $10 million to defeat the Bay Area levies. Players on both sides of the fight say that if taxing soda fails to win enough support in these liberal enclaves, it’s hard to imagine where else in the nation it could succeed.
“It&rsquos important because it&rsquos a first step,” says Berkeley City Councilman Laurie Capitelli, one of the unanimous votes in favor of putting the tax on the Nov. 4 ballot. “There&rsquos a serious public health issue that needs to be addressed.”
Advocates for the taxes tout research linking sugar consumption to conditions like obesity and Type 2 diabetes. Some studies have shown that raising the price of sugary beverages causes sales to go down. In a 2013 study, Harvard researchers found that increasing the price of a 20 oz. soda by 20 cents led to a 16% sales drop.
Food policy writer Michael Pollan, a professor at the University of California&mdashBerkeley who has endorsed the city’s measure, wants Berkeley to be a sort of pilot program. “I’m eager to see this experiment perform. We haven’t had a chance to see if taxing soda will reduce consumption because the industry has fought it so ferociously,” he says. “We need to try everything … I think there are still a lot of people out there who haven’t gotten the message that soda is bad for you.”
In Berkeley, Measure D would impose a one-cent-per-oz. tax on distributors of sugary drinks. If that tax was passed onto consumers, as the opposition argues it almost certainly will be, a $1.99 bottle of Coke at a Walgreen’s in Berkeley would cost $2.19. In San Francisco, Proposition E could institute a two-cent-per-oz. tax. Though the shorthand for the measures highlights soda, the taxes would apply to all high-calorie, sugary drinks. In San Francisco’s proposal, that means any beverage that contains added sugar and 25 or more calories per 12 oz.
Lower-income consumers, who both drink more soda and are more likely to be obese, have been at the center of the debate. San Francisco Supervisor Scott Wiener, who supports the tax, says that education about the potential dangers of excessive sugar consumption has not been enough of a deterrent. He and other advocates hope that the levy will help push consumers to choose healthier beverages, reducing soda consumption and, hopefully, improving people’s health.
Critics of the measures see the taxes as another form of government intrusion into personal behavior. “When the government decides they want to tell you what you should and shouldn&rsquot be eating, where does it end?” asks Roger Salazar, the spokesman for campaigns opposing both soda taxes. “Do they decide at some point that eating too many burgers is bad for you, so all burgers are going to be taxed?”
The campaign against the San Francisco tax has raised $9.1 million, while the Berkeley equivalent has raised $2.4 million. In both cases, almost all the money has come from the American Beverage Association’s political action committee.
Since no U.S. municipality has adopted a soda tax, it is not known how it would affect beverage sales. Ads opposing the taxes have made the case that the measures would lead to a drop in revenue for small businesses like convenience stores. Wiener calls that fear spurious. “If people drink less sugary drinks, they&rsquore not going to stop drinking or buying drinks,” he says. “They’re just going to buy different drinks.” As evidence, he points to Mexico, where sales of high-calorie beverages dropped after a similar tax was instituted in January, while sales of low-calorie beverages and consumption of water increased.
The tax may stand a better chance of passing in Berkeley, partly because it will require only a majority of votes. Even the beverage association’s Salazar admits the political reality of the college town with a proud activist history. “Berkeley is an eclectic city. It&rsquos different,” he says, “unlike any other city in California.”
The odds are tougher in San Francisco. Because the measure earmarks proceeds for health and nutrition programs, rather than going into the city’s general fund, two-thirds of voters must back the measure for it to pass. Wiener says they made the decision to set that higher bar after polling showed stronger support for a soda tax with revenue dedicated to the same cause behind the levy: promoting better habits.
To some tax supporters, even the debate around the issue is a win. Soda consumption has been slightly declining since 2005, and Pollan credits ballot measures like this one for creating awareness and making people think twice before they start swilling. “If [the tax proposal] fails, it could drive a stake in the heart of these efforts, at least for a while,” he says. “But even when these fights lose, they succeed in pointing the finger at soda as a problem.”
Soda Wars Bubble Up Across the Country
U nless something very unexpected happens, voters in San Francisco can expect to be answering a question like this come Election Day in November: Would you support a tax on sugar sweetened beverages, with the funds dedicated to health, nutrition, and physical activity programs? They can also expect to find themselves amid a whirlwind of arguments and ads from health organizations supporting the measure and from the powerful beverage industry opposing it.
Soda and other sugary drinks are popping up on city and state dockets across the nation, as lawmakers attempt to curb America&rsquos consumption of certain beverages. Like San Francisco, Berkeley, Calif., and Illinois are considering taxes on sugary beverages, while lawmakers in Maryland and Los Angeles may impose age restrictions for purchasing energy drinks like Red Bull. These follow a steady line of potable proposals in recent years that never made it onto the books, including former New York Mayor Michael Bloomberg&rsquos famous, failed attempt to limit the size of sodas available consumers in his city.
A big question is whether proposals like San Francisco&rsquos, which would levy a two-cent-per-ounce tax on distributors, will succeed and become an example for other cities to follow or whether&mdashas the beverage industry claims&mdashthat proposal is part of a dying breed. &ldquoThere&rsquos been a sharp decrease in the number being introduced,&rdquo says Chris Gindlesperger, spokesperson for the American Beverage Association. &ldquoIt&rsquos time for serious health professionals and lawmakers who want to be engaged in a comprehensive solution to obesity to move on from soda taxes and bans.&rdquo
It&rsquos still early in the legislative session for many states and cities. While time will tell how popular these proposals prove to be this year, there is no doubt that Americans&rsquo concerns about obesity are blowing up. In a recent Gallup poll, obesity followed only cost and access as the country&rsquos most pressing health issue, above cancer and smoking. The obesity rate is increasing, and research has linked the consumption of sugar-sweetened beverages&mdashincluding sports drinks, fruit drinks and teas&mdashto the risk of weight gain and chronic illnesses like diabetes. Some studies have shown that at certain price points, taxes on soda may decrease consumption, while others have found that soda taxes have little effect on body weight of consumers.
Though the San Francisco measure still technically has to be approved by the city&rsquos board of supervisors, the majority of them have already co-sponsored the bill, effectively guaranteeing that it will be on the ballot to go into effect, the tax will need the approval of two-thirds of voters. Proponents point to polls, like one released by Field Research on Thursday, finding roughly 67% of California voters would support a sugary drink tax if proceeds are earmarked for healthy initiatives, as they are in San Francisco. This week, the City Chamber of Commerce released another poll showing that just 51% of voters would support the tax, though the bill backers take issue with the wording of their question.
“We're not saying you can't drink soda,” Wiener says. “We're saying there are health effects directly related to it—just like we did with cigarettes—and we need to address those effects.”
The American Beverage Association emphasizes that other factors contribute to obesity, like high-calorie foods and Americans&rsquo lack of exercise. Gindlesperger argues that soda taxes are &ldquodiscriminatory policies against common grocery items&rdquo that unfairly &ldquosingle out&rdquo products made by their member companies, like Coca-Cola and PepsiCo, rather than looking at the bigger picture. When asked whether limiting the intake of full-calorie sodas would help fight obesity, even if it wouldn&rsquot solve the problem, Gindlesperger deflects the question, saying that soft drinks &ldquoare not any more the cause of obesity than any other caloric food.&rdquo
When it comes to soda taxes, the points of contention are both economic and philosophical. Last week, the first major study on how a soda tax would affect the labor market was released. Funded by the Robert Wood Johnson Foundation, the study, published in the American Journal of Public Health, found that a 20% tax levied on soda in Illinois or California would yield a net increase in jobs&mdashas truck drivers who used to haul sodas hauled other beverages and as the revenue generated by the tax was used to create other jobs. &ldquoPeople are still going to spend money,&rdquo says San Francisco Supervisor Scott Wiener, one of the bill’s primary sponsors. &ldquoThey’re just going to spend it on something else.&rdquo The ABA maintains that soda taxes mean job losses, at least among their member companies.
In San Francisco, advocates at a recent street festival handed out fliers opposing the proposed tax one bullet point was that such a tax limits consumer choice. Critics of the energy drink bill in Maryland have made similar arguments, saying that banning anyone under the age of 18 from buying a Monster Energy drink is government overreach. &ldquoWe’re not saying you can’t drink soda,&rdquo Wiener says. &ldquoWe’re saying there are health effects directly related to it&mdashjust like we did with cigarettes&mdashand we need to address those effects.&rdquo
A state lawmaker in California recently proposed that all sugary drinks come with warning labels. The Golden State looks poised to be a battleground over sugar this year. In 2012, two sugary-beverage taxes on the ballot in the cities of El Monte and Richmond failed by wide margins. A related state bill died in committee.
San Francisco has a proud reputation of making progressive sacrifices&mdashbeing the first in the nation to ban plastic bags, for example&mdashthat may help yield a different result for health advocates here. &ldquoWe have a history of supporting these kinds of public health measures,&rdquo says Wiener. &ldquoPolicy trends often start in San Francisco and then spread elsewhere. We’re proud of that as a city.&rdquo The ABA says they’ll be spearheading the effort to oppose the measure here as they have elsewhere, running ads, courting local businesses, and likely spending tens of millions.
Voters reject tax on sugary drinks in two California cities
Beverage industry forces flexed their political muscle once again Tuesday, dealing crushing defeats to two different sugary drink tax measures in the Golden State.
In El Monte, nearly 77% of voters rejected a proposal to tax businesses 1 cent for every ounce of sugary beverages sold. A similar plan fell in the Bay Area city of Richmond, with about 67% of voters opposed.
Both measures sparked intense campaigning from the beverage industry, which used a broad array of tactics to argue that the tax would hurt families and small businesses. Combined, the opposition committees in Richmond and El Monte spent more than $3.5 million.
“What we found was, the more people knew about it, the more they didn’t like it,” said Fred Muir, a spokesman for the opposition committee in El Monte. “They don’t like the idea of [the city government] trying to legislate their behavior, and they don’t like impact on small businesses.”
Chuck Finnie, a spokesman for the Richmond opposition campaign, said the victory was part of “a bigger war in the United States” between soft drink companies and health advocates who want to tap into their revenues to combat obesity problems. Despite Richmond’s reputation as a “pro-tax town,” he added, the measure failed to gain traction with most voters.
“The lesson from this is the tax doesn’t make sense,” Finnie said. Voters “really rejected the notion that you can fight obesity with this kind of tax.”
The victories Tuesday follow a series of successful efforts by the American Beverage Assn. to thwart sugary drink tax proposals around the country. Last year, a beverage tax bill in the California Legislature failed to even make it out of committee for an Assembly floor vote.
Mayor Andre Quintero, the leading proponent of the tax in El Monte, said the results of the race could have a chilling affect on local politicians. A total of 10,845 voters rejected the measure, compared with just 3,279 in favor.
“To be competitive in a race like this you’ve got to raise between $1.5 [million] and $2 million,” he said. “And for a local official, that’s just unreal.”
Quintero also pointed out that voters approved increases in taxes of various types Tuesday in cities such as Artesia, La Mirada and Culver City — where there was far less spending from outside corporate interests.
Still, Quintero suggested that the beverage tax battle wasn’t over, saying “history will ultimately look kindly on our efforts as the beginning stages of a very important movement.”
That sentiment was echoed by health advocates, who said their push to tax sugary drinks was not going away.
“While Big Soda may have stopped this measure, Mayor Quintero and advocates of children’s health in El Monte have pioneered a new idea … and paved the way for future policies that will hold the beverage industry accountable,” said Harold Goldstein, executive director at the California Center for Public Health Advocacy.
War over soda taxes coming to a polling place near you
Health advocates are plotting to bring voter referendums and legislation to tax soda in as many as a dozen U.S. cities in 2016.
At the grass-roots level, health advocates who support soda taxes are starting to feel like they’re finally getting traction. | Getty
Government do-gooders and conservatives who are worried that America is becoming a nanny state have one more thing to fight about in 2016: soda taxes.
Public health advocates, flush from victories in Mexico and Berkeley, California, are plotting to bring voter referendums and legislation to tax soda in as many as a dozen U.S. cities in 2016. It’s all part of an international strategy backed by billionaires in New York and Texas, including former New York City Mayor Michael Bloomberg, to reduce consumption of sodas, juices and other sugary drinks in the fight against spiraling rates of obesity, diabetes and other diet-related diseases.
“We think that 2016 is going to be a very important year for the sugar-sweetened beverage tax discussion,” said Kelly Henning, director of public health programs at Bloomberg Philanthropies. “We think the Berkeley tax and the Mexico tax are really pushing the debate forward.”
If that discussion catches fire, it could turn out to be an unintended gift for Republicans. The timing of the initiatives, coinciding with a presidential campaign already brimming with anti-government vitriol, all but guarantees a white-hot debate in which even a super-sized Slurpee could be turned into a symbol of freedom.
Sin taxes and other measures aimed at changing behavior have long been red meat for those who argue that such government meddling is paternalistic, punitive and infringes on Americans’ freedom — whether it’s Obamacare’s mandate that Americans buy health insurance, ordinances that ban smoking in public places or first lady Michelle Obama’s push to get school kids to eat their vegetables.
Even in liberal New York City, the reaction to Bloomberg's anti-soda crusade was ferocious. The New York Times derided his effort to prohibit the sale of sodas larger than 16 ounces as “a ban too far.” An illustration of city dwellers, backed against a wall grasping plastic beverage cups in fear, graced the cover of The New Yorker. The soft drink industry ran a full-page ad in the Sunday New York Times, caricaturing the mayor as a nanny, under the headline: “You only thought you lived in the land of the free."
Sin taxes are nothing new, of course. Those levied on alcohol, cigarettes and gambling already provide a steady stream of revenue to state and local governments and have changed purchasing behavior if the taxes are high enough. Whether adding sugary drinks to the list might galvanize voter backlash is an open question, but nanny state issues tend to play well in campaign seasons animated by populist anger.
“What I think it provides is yet another reminder, certainly for Republicans and the Republican-leaning electorate, of ongoing government social engineering and government overreach,” said Scott Gessler, a Republican and a former Colorado secretary of state.
At least one GOP presidential candidate, Sen. Ted Cruz, is already on the record against such efforts, lampooning Bloomberg’s 2012 ban, which was later struck down by the courts. Cruz introduced a budget amendment in March 2013 that would have prohibited federal regulations on the size or quantity of food and drinks — a purely symbolic stand against a federal government that was not considering such a move.
And Bloomberg, whose private foundation poured millions into the soda tax efforts in Mexico and Berkeley, continues to be a conservative target even though he’s not running for public office. A television ad sponsored by the National Rifle Association during the Republican presidential debate in August linked the billionaire’s anti-soda and anti-gun stances to the decision facing voters.
“Even if he doesn’t run for president, Bloomberg will try to pick the president,” the ad warns. “Bloomberg spends his billions backing politicians who want to take away your rights, limit your freedom.”
Coming to a polling place near you
But at the grass-roots level, health advocates who support soda taxes are starting to feel like they’re finally getting traction. They won’t name which cities might be next to carry the soda tax banner — fearing Big Soda will crush fledgling efforts — but possibilities include progressive communities like Seattle, San Francisco, Oakland and Austin, Texas.
Before the successful Berkeley initiative last year — just months after Mexico’s Legislature passed a 10 percent soda tax as part of a broad revenue package — the beverage industry had defeated about 30 tax proposals, from Philadelphia to Telluride, Colorado.
Berkeley, for all its quirkiness, was widely seen as a crack in Big Soda’s armor — especially after the industry spent some $30 per voter trying to scuttle the initiative but lost three out of every four votes. This next election cycle will be the first real test of whether advocates can build on their landmark win.
Even more significant was the beverage industry’s loss in Mexico, where lawmakers passed a 10 percent tax on soda and an 8 percent tax on junk food like chips and pastries.
“The Big Soda script is now predictable, so groups feel better able to handle the industry tactics,” said Jim Krieger, a former health official for King County, Washington, who now leads Action for Healthy Food, a newly formed 501(c)(4) in Seattle that’s advocating for the soda taxes.
Each time, advocates say, the message from the beverage industry has been the same: Soda taxes are regressive, falling heaviest on the poor. They are riddled with loopholes (milkshakes are not covered, for example) and raise grocery bills — all the while doing nothing, the industry claims, to fight obesity.
The playbook is reminiscent of the one used by Big Tobacco, advocates say, and they are using similar strategies to fight back: Focusing on local campaigns is key because health groups lack the funds to compete with the beverage industry on the federal level. Advocates are also sharpening their anti-soda messaging, so that even when they lose local battles they're winning the broader PR fight.
“They are powerful, but it doesn’t mean they are unbeatable,” says Tom Farley, who served as New York City health commissioner in the wake of Bloomberg’s attempted Big Gulp ban. “There was a day when the tobacco companies were considered unbeatable, too.”
Sugary drink makers dispute the idea that health advocates are gaining momentum heading into 2016, but the industry is still lobbying aggressively to make sure a soda tax bill by Rep. Rosa DeLauro, which has just two co-sponsors, fizzes out faster than a warm can of Coke.
The federal legislation, which the Connecticut Democrat introduced in 2014 and again this year, would levy a tax of a penny per teaspoon of sugar on sweetened beverages in all 50 states — with the potential to raise as much as $10 billion a year, according to the Center for Science in the Public Interest, a proponent of soda taxes.
Lobbying figures show the American Beverage Association has spent north of $350,000 a quarter lobbying against the bill, among other issues, even though the bill has virtually no chance of passing. Coca-Cola has been spending from about $2 million to $3 million per quarter and PepsiCo more than $1 million per quarter lobbying, including against the tax.
The industry has been known to pour tons of money and cozy up to local community groups: In Philly, $10 million was donated to a children's hospital. In San Francisco, $45,000 to the progressive Harvey Milk LGBT Democratic Club. In New York, the industry teamed up with the NAACP and the Hispanic Federation to oppose Bloomberg’s soda size limits.
Industry money is difficult to track, but the NAACP received at least $235,000 in grants from the Coca-Cola Foundation in 2011 and 2012 and the Federation lists Coca-Cola as one of its funders.
“I think a lot of elected leaders see that it’s a dead end,” William Dermody, vice president of policy for the American Beverage Association, said of the soda tax idea. “People don’t want their grocery items taxed or any single grocery items taxed in a discriminatory fashion.”
Dermody’s group, which represents Coca-Cola, PepsiCo, Snapple Group and other sweetened-beverage makers, is focusing its efforts on a campaign that stresses the need to balance calories with exercise and a varied diet. To that end, ABA has created a youth-targeted social media website called Mixify that provides drink recipes and guidance on how to do ab workouts and other calisthenics using hip GIFs and memes.
“We’re going to be out there getting the message out of [the need for] balance,” Dermody said. “There is a trend that I think you’ll see increasing next year, a trend toward cooperation between the industry and the public to find ways to work together to maintain balance in their diets for all foods and beverages.”
The billionaire factor
Another key dynamic that’s changed is that health advocates are now getting significant financial backing to scale up what had previously been largely disorganized, boot-strap efforts.
Bloomberg became the face of the anti-soda crusade with all the press over his failed Big Gulp ban. But what’s not well known is that his foundation has poured more than $18 million into the successful campaign in Mexico to pass the soda and junk food taxes that took effect last year.
That effort, pushed by Mexican President Enrique Peña Nieto, was driven by both health and budgetary imperatives. The average Mexican drinks 43 gallons of sugary beverages a year, say Mexican health officials, and it shows: About 70 percent of the population is overweight and nearly one-third is obese — statistics that make Mexico a rival to the United States for the title of world’s fattest country.
Brazil, Colombia and Peru, which all face ballooning obesity epidemics, are considering similar taxes as well, Henning said. Chile recently instated a soda tax, along with a crackdown on junk food marketing.
Meanwhile, Houston billionaires Laura and John Arnold, who made a fortune in energy trading, have poured $40 million into research to bolster the scientific basis of federal dietary recommendations and launched Action for Healthy Food in late 2014, with a $1.7 million budget and the sole aim of getting people to eat less sugar.
In July, the group held a meeting in Oakland, California, with supporters from around the country to map its soda-tax strategy.
The Arnolds’ Action Now Initiative, a separate nonprofit, spent $55,000 as nearly the sole funder of a failed soda-tax push in the tiny ski town of Telluride, where the couple owns a vacation home. The Arnolds also contributed $70,000 to the Berkeley effort, making them the second highest donor after Bloomberg, who dropped a whopping $657,000.
In addition, the Arnolds are now working with conservative political consultant Anthony Holm, a former spokesman of Texas homebuilder Bob Perry, a major GOP contributor who helped fund the “swift boat” attack against former Sen. John Kerry. Advocates say Holm attended the July strategy meeting. Neither Holm nor the Arnolds responded to POLITICO inquiries.
The Berkeley experiment
It’s too soon to know whether the tax Berkeley voters passed in 2014 will reduce soda consumption, but a study in October suggests the bulk of the tax is being passed on to consumers, which could affect choices in the grocery aisle. The city is on its way to making its first million dollars from the measure, with at least $600,000 raised so far.
The soda industry, however, is quick to dismiss the liberal enclave as a political outlier that doesn’t represent the views of mainstream America — and some tax advocates agree.
Michael Jacobson, president of the Center for Science in the Public Interest and a longtime supporter of soda taxes, said he was more impressed with the effort in San Francisco, which, while ending up shy of the two-thirds majority needed for approval, did win 55 percent of the vote despite more than $9 million in opposition spending.
“I think San Francisco is more important,” Jacobson said. “People don’t even really drink soda in Berkeley. They drink kombucha.”
Health arguments aside, many advocates are hopeful soda taxes might take hold more broadly as financially pressed public officials look for new revenues to close budget deficits and to help pay for rising health care costs.
“Berkeley certainly whetted the appetite,” Jacobson said. If lawmakers in a less-progressive state like Illinois, where soda tax proposals have languished for years, approved a tax, “that would be huge,” he said. “That would make it OK for other states to say, ‘OK, that’s a legitimate source of revenue.’”
Proponents say the tax could raise up to $600 million a year in Illinois. In California, a sugary drink tax — which will likely be reintroduced next year in the Legislature — could bring in more than $2.5 billion a year.
The Mexico proof of concept
Mexico, meanwhile, has become test case not just because it proves that such a tax can be imposed, but because it is changing purchasing behavior, which advocates hope will improve health.
Preliminary data indicate purchases of sugary drinks dropped about 6 percent over the first year and that trend appears to be accelerating. The measure also put 18 billion pesos, or more than a $1 billion into the Mexican government’s coffers last year.
“Industry is now reluctantly recognizing that the tax is working,” said Juan Rivera, director of the Center for Nutrition and Health Research at the National Public Health Institute in Mexico and a leading proponent of the tax. “Some of the people in academia and also people in NGOs and the government, we are now really thinking about the correct amount of a tax.”
If a 10 percent tax on sugary drinks appears to have caused a modest drop in consumption, Rivera said, “maybe you will start to have effects that may be very meaningful” with a 20 percent tax rate. Advocates have since called on the Mexican government to double the tax.
U.S. universities, nongovernmental organizations, and public health and nutrition advocacy groups are paying close attention, Rivera said. “They are very, very interested,” he said. “We have a lot of invitations to present, more than we can attend.”
Rivera said he’s optimistic other countries will follow Mexico's lead in the foreseeable future.
“In Latin America … awareness about the effects of obesity, the costs of obesity to society and to the health systems, is something that worries a lot of politicians these days.”
Even though a dangerous and carcinogenic ingredient, 4-MEI, has been identified in soda products, certain major manufacturers have failed to make the necessary adjustments.
Studies have shown that one of the ingredients in Pepsi, 4-methylimidazole (4-MEI), a byproduct of the caramel colouring that is used to give Pepsi its rich hue can contribute to the development of certain cancers.
Although this ingredient was discovered last year, and Pepsi agreed to remove it completely from their products, it has been determined that certain Pepsi plants may still be using the carcinogenic ingredient.
Only in California has the ingredient been removed entirely from Pepsi products, those products that are marketed and sold outside of California may still contain dangerous levels of 4-MEI. California&rsquos strict laws regarding food labels and warnings caused Pepsi to take action.
California enacted legislation in 2012, deeming any ammonia-caramel artificial colourings to be carcinogenic, according to Proposition 65. This ruling helped to protect soda lovers from being exposed to this harmful ingredient.
The rest of the country has not yet enacted this type of legislation, allowing Pepsi products containing 4-MEI to continue to be sold. Pepsi products have been found to four to eight times more dangerous than other sodas, because of this ingredient. Sodas that do not contain caramel colour did not test positive for the 4-MEI ingredient.
The California laws set a level of 29 micrograms of 4-MEI as the highest end of the range allowed to be sold. Testing on products around the country indicated that some Pepsi and Coke products contained up to 150 micrograms of the substance in each can.
Both soda companies publicly promised to reduce the ingredient to safe levels, yet only Coke has fully complied with this. Michael Green, of the Centre for Environmental Health, states, &ldquoWe applaud Coke for taking this health protective action for consumers nationwide. Pepsi&rsquos delay is inexplicable. We urge the company to take swift action to provide all Americans with the same safer product they&rsquore selling in California.&rdquo
Officials at Pepsi have vowed to remedy the situation, and were expected to complete the modifications to the formulas by February 2014.
It is important for consumers to realize that this ingredient is not only found in Coke and Pepsi, or other soda products, and it can be present in many other foods, too, including breads, beer, meat, soy sauce, Worcestershire sauce and gravy.
Knowing the ingredients that are in the foods you eat is important, and avoiding foods with carcinogenic ingredients is a good way to start eating healthier.
Is Big Soda winning the soft drink wars?
Without most of the nation noticing, the beverage industry has found a way to snuff out local sugar taxes—by squashing them at the state level.
When the mayor of Philadelphia unveiled his battle plan against sugary sodas, it looked like he was riding a national wave. The year was 2016, and one city after another was trying to fight obesity by nudging their citizens away from cheap, high-calorie drinks. In a speech to the City Council unveiling his first budget, Mayor Jim Kenney declared his plan to pay for a host of city initiatives with a new tax on every ounce of soda.
“This was a fight we thought was worth having,” said James Engler, Kenney’s chief of staff.
For a decade, concern had been rising in the public health world that soda’s superfluous calories were fueling an epidemic of obesity and diabetes, and supporters in Philadelphia and elsewhere embraced local taxes as a win-win—a way to encourage healthier choices while also generating some new money to help communities with high obesity rates. In California, Berkeley had passed a soda tax in 2014. Oakland, Boulder and Chicago would soon take up their own laws.
In Philadelphia, the soda industry poured more than $9 million into fighting the new tax, to no avail. The City Council passed the law in June 2016, and Philadelphia began collecting 1½ cents for every ounce of soda sold—boosting the price of a 12-ounce drink by 18 cents, and far more on big convenience-store cups. Soda companies, represented by the American Beverage Association, appealed the law, and the case went all the way to Pennsylvania Supreme Court—where the city won.
Opponents of Philadelphia’s proposed soda tax demonstrate outside City Hall in May 2016. The beverage industry has discovered that it’s far more expensive to fight soda taxes at the city level and has refocused its efforts to block soda taxes in state legislatures. | Matt Rourke/AP Photo
That might have seemed like the end. But it was only the start of a whole new fight. Starting in 2017, the beverage industry changed tactics and opened a new front at the state capital in Harrisburg, spending considerably less money—less than $2 million—on an influence campaign to get the state’s business community to put pressure on their legislators. The goal was no longer just to quash Philadelphia’s tax: It was to pass a new state law that would prohibit any city in Pennsylvania from passing a local soda tax.
And that fight is still very much alive. One version of the bill failed in 2017, and a similar measure is before legislators this year, with the lobbying effort led by a major grocery chain allied with beverage manufacturers who spearheaded the earlier version.
“They don’t want to just stop us from doing it now,” Engler said in an interview. “They want to make sure it wouldn’t happen anywhere else, either.”
Pennsylvania has found itself the latest battleground for a national strategy by soda producers aimed at stopping local taxes on their products—not by fighting the cities directly, but by pushing pliant state legislatures to ban any such tax increases statewide. Called “preemption” laws, they’re designed to limit cities from imposing taxes of their own. Legislatures in Arizona and Michigan have already passed state laws forbidding local soda taxes. In Washington state, the industry backed a voter initiative barring local soda taxes it passed in 2018.
Perhaps the industry’s most remarkable success has been California, a progressive state in which multiple cities passed their own soda taxes in the wake of Berkeley’s first-in-the-nation law and additional cities were ramping up campaigns. There, the industry used the statewide initiative system as leverage over lawmakers: It collected enough signatures to put a measure on the state ballot that would prevent any city or locality from imposing any tax on residents, no matter what the reason, unless approved directly by two-thirds of voters. The lobby then offered to withdraw the measure from the ballot if legislators simply passed a law stopping local governments from taxing soda. Faced with a potential new law that could have crippled budgets statewide, they complied. California’s preemption law went into effect in 2018—ensuring that, until 2030, the only cities in the state with extra beverage taxes are the handful, like Berkeley, that have already adopted them.
Signs in supermarkets in Seattle, top, and Philadelphia, bottom, inform consumers that city soda taxes have been applied to the sugary beverages on sale. | Lisa Baumann/AP Photo Matt Rourke/AP Photo
In its nationwide push against soda taxes, the beverage industry makes two main arguments: One, the health benefits of taxing soda are overstated and two, the taxes put an unfair burden on small businesses and shoppers. “We are definitely solidly behind preemption efforts because this is a very damaging tax to consumers, working families and small businesses,” ABA spokesman William Dermody said in an interview.
Beyond that, however, its campaign trades on a basic insight about modern American politics: Although the liberal leadership of American cities might be a hard nut for a pro-business lobby to crack, state legislators are often far more friendly to business, and they often have the power to overrule city laws. And it’s often much cheaper to lobby in capitals like Harrisburg, Sacramento and Springfield than to wage a fight in expensive cities.
A study published earlier this year found that at least 12 states have enacted preemption laws aimed at squashing local anti-obesity measures including soda taxes four states have specifically outlawed soda taxes and three other states have considered preemption laws in the past year.
“When you have a conservative state and a progressive city within that state, it becomes challenging,” said Pennsylvania Rep. Donna Bullock, a Democrat who supports Philadelphia’s tax, “because the conservative lawmakers use preemption to control progressive cities.”
THE SODA INDUSTRY'S preemption strategy largely has gone unnoticed on the national level, in part because state legislatures tend to draw less attention than policy fights in Washington and in big cities, and in part because beverage companies often obscure the real focus of the laws by framing them as opposition to “grocery” taxes. They also enlist grocers associations, local farm bureaus and retailers as allies to make it appear that the opposition is local, even though the campaigns draw significant funding from the national association.
Public health groups, which are often local, find themselves outgunned against an organized national strategy, and tend not to have the resources to play defense in multiple state capitals at the same time.
There are a few exceptions, including the American Heart Association, which has been actively pushing for soda taxes nationwide. But even with a national network of lobbyists, it has been outspent and outmaneuvered in state after state. “[H]aving to defend against preemption has become part of our strategy,” the AHA’s Jill Birnbaum told POLITICO. She said this approach is playing out in virtually every state where her organization is pursuing soda taxes.
Another national player is former New York Mayor Michael Bloomberg, the billionaire who became the face of anti-soda policy with a failed 2012 attempt to ban large sodas in New York. His organization now goes head-to-head with the beverage lobby in state and local campaigns, pouring more than $17 million into a trio of California ballot initiative campaigns, including the Oakland soda tax fight. He also put millions toward trying to defend a tax in Cook County, Illinois, that includes much of greater Chicago (unsuccessfully) and Philadelphia’s tax (successfully, so far). His money also helped beat back a preemption ballot initiative in Oregon. In Washington state, where the industry-backed preemption initiative prevailed, Bloomberg didn’t get involved.
Public health activists, top, hold signs in favor of San Francisco’s soda tax during a rally in 2014. Former New York Mayor Michael Bloomberg, bottom, has helped fund some campaigns for anti-obesity measures including soda taxes, but spending by him and other advocates has been dwarfed by lobbying by the beverage industry. | Justin Sullivan/Getty Images Eric Risberg, File/AP Photo
Dermody, the spokesman for the American Beverage Association, said in an interview that the preemption push has gained urgency in the past few years. He pointed to an ultimately unsuccessful 2017 Santa Fe soda tax proposal that drew the support of the city’s political establishment as “one of those turning points” in the larger debate.
“I think a lot of folks in other cities and towns started to pay attention to it,” Dermody said, because the New Mexico effort underscored the idea that “my gosh, this could happen anywhere.”
In its push against soda tax, the beverage industry is acting in concert with business owners and in some cases labor groups, like truck drivers, that worry about the impact if taxes start to cut down on soda sales. “We back all of these measures, but they’re backed by many other folks in the states at the same time,” Dermody said.
In Harrisburg, the preemption push has been driven by both the ABA and the Wakefern Food Corporation, which operates grocery stores in Pennsylvania. Anthony Campisi, who has lobbied on the chain’s behalf, said there’s a natural alignment of interests between the beverage manufacturers and the stores that sell their products carbonated beverages are an important source of revenue, particularly for convenience stores.
“What the beverage tax has done is essentially made it very hard for those stores, particularly in poor urban neighborhoods, to succeed,” Campisi said. “It really does it make it difficult to keep stores open in poor urban neighborhoods when there’s a massive tax on a core area of the business.”
While public health experts say the efficacy of soda taxes is well-established, the beverage industry points to contradictory evidence. Despite adopting a national soda tax in 2014, Mexico’s adult obesity rate rose from 2012 to 2016, Dermody noted, and research has shown that while consumption declines in areas with soda taxes, the reduction is at least partially offset by augmented sales in nearby jurisdictions. A recent editorial in the Journal of the American Medical Association said it is “still unclear if these taxes improve health outcomes,” given the multiple factors causing obesity.
Proponents of soda taxes point to studies showing they help reduce consumption of sugary drinks. Proponents of San Francisco’s soda tax emphasize the connection between sugary drinks and diabetes, top, and a display outside New York City Hall, bottom, illustrates how much sugar is in soft drinks of various sizes. | Jeff Chiu, File/AP Photo Richard Drew, File/AP Photo
“If you tax beverages at an extremely high rate, do sales go down? Yeah. We’ve seen that happen. Do they improve public health, and does overall consumption of sugar go down? No,” Dermody said.
Despite the murkiness, the industry is worried. Both Coke and Pepsi identified soda taxes as “risk factors” in recent reports to investors. Pepsi’s filing described a global phenomenon, encompassing not just Seattle but Saudi Arabia and France, in which soda taxes would reduce demand and amplify the public perception “that our products do not meet their health and wellness needs.”
THE LOBBY HAS reason to be concerned: Whether because of taxes or health concerns, sugary beverage consumption has begun declining in the United States. The American Medical Association endorsed soda taxes in 2017. This spring, the American Academy of Pediatrics also threw its weight behind taxing soda to bolster public health.
Given the challenges of campaigning in liberal cities, it may have been inevitable the beverage industry switched to statehouses. It is certainly more economical.
Campaign finance numbers from California neatly illustrate the calculus. The American Beverage Association spent more than $30 million combined on failed attempts to beat back local soda taxes in San Francisco, Oakland, Berkeley and Albany, California. It cost a fraction of that to qualify the statewide initiative it used as leverage to push Sacramento into a deal that ended local soda taxes for more than a decade. The ABA channeled $8.9 million to the committee managing the initiative.
“What they did in California last year,” said Harold Goldstein, executive director of Public Health Advocates, “was a sign to me that this is part of a much more intentional national strategy.”
The shift to state preemption has alarmed public health advocates and their political supporters, who had spent years mounting a city-by-city effort to build a track record—and momentum—for public health policies designed to slow the obesity rate.
“The mindset of prevention folks on sugary beverages was, ‘We’re not going to win at the state level until we win a constituency and get some momentum at the local level’,” said Victor Colman, director of the Childhood Obesity Prevention Coalition.
Industries hoping to avoid regulation often find it easier to fight a single battle in a state capital than a series of skirmishes in cities, said Jennifer Pomeranz, a public health professor at New York University who has researched preemption. Distance works to their advantage, she argued.
“Local legislators are pretty attuned to the needs of their community members, so the industry has a harder time,” Pomeranz said, “but once you’re at the state level, legislators are a little more disconnected.”
The Philadelphia experience figured into the calculus in Michigan, one of several states in which preemption efforts have themselves been preemptive strikes. Rather than wait for local soda tax proposals to bubble up, opponents moved to eliminate the option before anything could be proposed.
In 2017, before any jurisdiction had floated a soda tax in his state, Michigan state Sen. Peter MacGregor introduced a preemption bill, saying soda taxes were “creating controversy in other locations, Cook County (Chicago) and Philadelphia for example.”
Birnbaum of the American Heart Association also said there were exploratory soda tax efforts underway in Detroit when the Michigan Legislature passed its preemption bill and crushed the possibility. Senators representing Detroit were among the few legislators who voted no.
In Arizona, state Rep. T.J. Shope introduced a preemption bill that was signed into law in 2018. As in Michigan, no city in Arizona had yet proposed a sugary beverage tax. But a November 2017 poll found broad public support for a statewide soda tax, and he suspected some Arizona cities were inclined to consider them.
A third-generation grocer, Shope said he was approached about sponsoring the preemption bill by soda industry representatives who were keeping an eye on the national landscape.
“I think they were probably looking for a state to take a stand,” he said.
IN 2018, California became the soda industry’s Rubicon. Because the state is both the nation’s largest economy and its biggest consumer market, economic and regulatory decisions there can have an outsize impact—particularly given California’s function as a liberal bellwether in which ambitious progressive policies are tested and then exported to other states.
Moreover, California offered the beverage industry some tools of direct democracy not available in other states, specifically the state’s ballot measure system. For a few million dollars, a sum that amounts to a rounding error for major corporations, interest groups can place a measure on the state ballot and then offer to pull it if Sacramento authorizes an alternative deal. As a result, it’s not uncommon in California for groups to launch a ballot measure that’s unpalatable to lawmakers or to an ideological rival, then forge a legislative deal that averts a costly campaign.
California has become the soda industry’s Rubicon, with the tide swinging for and against soda taxes in a legislative battle that’s been waged for several years. Top, a California state assemblyman drinks a soda on the floor of the capital in Sacramento. Bottom left, a soft drink machine in the basement of the California state capital building and bottom right, a convenience store owner rings up a soft drink purchase in San Francisco. | Rich Pedroncelli/AP Photo Rich Pedroncelli/AP Photo Jeff Chiu/AP Photo
A committee launched by another business group but ultimately funded largely by soda giants got a measure on the ballot that would have set a two-thirds popular vote threshold for local governments to pass new taxes—a change that Democratic lawmakers and allies like organized labor warned would be ruinous for local finances. Though the group’s name didn’t exactly trumpet the soda industry’s involvement—“Californians for Accountability and Transparency in Government Spending, a Coalition of California Businesses, Taxpayer Groups, Business Property Owners, and Beverage Companies”—the effort was universally understood as a beverage industry power play after the ABA kicked in nearly $9 million.
With a deadline to remove measures from the ballot closing in, organized labor and business groups struck a deal to remove the vote threshold measure from the ballot. The new language barring soda taxes was swiftly inserted into a budget bill, which lawmakers passed after railing against what they called industry extortion. Nascent soda tax campaigns in cities including Stockton and Santa Cruz evaporated.
Optimistic health advocates had hoped that California would become a cautionary tale of industry overreach, in part because lawmakers resented having their hands forced. Instead, it appears that the pendulum is still swinging in favor of the beverage industry. This year, every one of a batch of bills intended to combat obesity has collapsed, from taxing soda to slapping health warnings on cans to limiting portion sizes.
The medical groups backing the bills say they aren’t defeated yet: They plan to put a statewide soda tax measure on the 2020 state ballot, which could give them leverage to negotiate a deal with the soda industry.
But the legislative wreckage attests to the beverage industry’s favorable odds when it’s focused on statehouses. “You kind of feel like if it could happen in California,” Birnbaum said, “it could happen anywhere.”
Time for Tax Tasks
May 1: Happy May Day!
Or is it mayday?
May Day globally is a time for celebrating workers' contributions. Mayday, as one word, is a universal distress signal. With the coronavirus pandemic not quite under total control, both meanings continue to apply as we head into 2021's fifth month.
More people are being vaccinated, and some businesses are open again. But many workers are still out of jobs and dealing with continuing COVID-19 financial stress.
The third COVID economic impact payment provides some relief. And President Joe Biden, just wrapping up the first 100 days of his administration, is proposing some tax law changes that could help. Those, however, are down the road a-ways. So let's look at tax tasks that are on the books and need attention this month, like the delayed Tax Day 2021 coming up on May 17. Don't worry. I'll remind you when we get even closer to the filing deadline.
2021 definitely is a year when we can use a little celebration, even if it's a Mexican holiday that tends to spur more festivities here north of the border. So raise that margarita during your fiesta, either at a still COVID-conscious real-life party or virtually. Your state tax collector will thank you, since during the pandemic, sin taxes were a lone revenue bright spot for many states.
May 9: Happy Mother's Day!
Now that you and your mom both have been vaccinated, make up for last year's missed Mother's Day. All the love and best to every mom, from the new ones just discovering the joys, tax and otherwise, of new parenthood to those gracefully maneuvering their Golden Years while getting some tax-advantaged help from their families.
May 10: More restaurants across the country are opening up table service. Folks who are so done with coronavirus take-out and deliver are happy to be served in person again. And those servers are especially thrilled to see the diners, especially the ones who are good tippers. If you're comfortable going out to eat, be sure to reward your server. The same tipping reminder applies for food delivery people if you're still self-isolating.
If a tip isn't included in your restaurant check or food delivery charge, click the image above to calculate how much to tip.
Those of you getting the tips, remember that your tips are taxable income. If you got such added financial thanks that came to a total of at least $20 last month, whether as a waiter/waitress or hair stylist or valet or whatever job where gratuities are common, you need to account for them today. Report your tips to your employer on Form 4070.
May 10: The deadline to file your tax return is just a week away. If you're still working on or finishing up your 2020 Form 1040, check out the filing pieces of advice in the ol blog's monthly tax tips pages. You'll find links near the top of this column, right under the Tax Tip yellow No. 2 pencil tip image.
May 14: The last weekend before Tax Day 2021 is here. Time to finally finish that return. If you haven't already, find all those tax documents that you shoved in a drawer when you learned nothing would be due in April. For most of us, claiming the standard deduction is the way to go. You'll need just your W-2 and possibly some 1099 forms. If you still itemize, this checklist details the additional data you'll need to file.
May 17: Tax Day 2021 is finally here. Stop cheering (or crying), finish your return and get it on its way to the Internal Revenue Service.
You've got until midnight tonight (your local time) to electronically file your 1040. You can do that and possibly save some money by using Free File, the online no-cost tax preparation and e-filing partnership between the IRS and Free File Alliance.
The official Free File site at IRS.gov this season offers nine participating tax software options if your adjusted gross income is $72,000 or less, regardless of filing status. If you make too much to use the online software, look into using Free File's fillable forms.
And if you just can't finish your 1040 by today, send the IRS instead Form 4868 to get until Oct. 15 to file your return. Remember though, you must pay any due tax with your extension request.
May 21: Whew! Now that filing is done (except for us procrastinators on extension) and you've had a few days to get settled, it's time to take care of your tax records. You need to hang onto some filing paperwork just in case the IRS has follow-up questions.
May 25: Part of the emergence from COVID-19 lockdown is the return of summer camps. If you were able to get your kiddos into a day camp, be sure to hang on to the receipts. The Child and Dependent Care Tax Credit has been expanded for the 2021 tax year, making it even more valuable when you file your taxes next year.
May 29-31: Happy Memorial Day long weekend! If you and yours are vaccinated and taking advantage of that to welcome the unofficial beginning of summer with a road trip, enjoy. After months of lockdown, a change of scenery definitely will be nice. And if you have a second home that you're leasing to other gotta-get-away travelers, stay on top of all the short-term rental rules, at both the possibly tax-free federal income and more-local occupancy tax levels.
Small Business Tax Calendar: Important filing, deposit and record keeping dates throughout the year that your company needs to know. You can get more tax calendar information at the IRS' online calendar page and view the full year's important business and individual tax dates in IRS Pub. 509.