High-Dollar Donors Back Soda Tax Fights

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By Casey Wooten

Nov. 4 — It may soon get a little more expensive to quench your thirst—and your sweet tooth—in some parts of the U.S.

Four cities are set to vote Nov. 8 on taxing sugary beverages. Ballot initiatives in three Bay Area localities—San Francisco, Oakland and Albany, Calif.—could join their neighbor Berkeley in imposing a 1-cent-per-ounce tax on sugar-sweetened beverages like Coca-Cola and Pepsi. Boulder, Colo., is set to hold a vote on a 2-cent-per-ounce tax.

For Bay Area residents, that’s an extra $1.44 for your average 12-pack of soda, pop, soft drink or whatever the local lexicon coins it.

The fight over sugary beverages—and perhaps Americans’ waistlines—has brought nearly $40 million in political spending into the Bay Area, making the ballot initiatives some of the most expensive local campaigns ever. The success of the ballot initiatives could put the idea of taxing sugary beverages into mainstream political discussions and lead more cities to adopt similar provisions.

“It can take off very quickly, to the point that it spreads nationally,” Michael Siegel, professor at Boston University’s school of public health, told Bloomberg BNA.

Nationwide, the only cities with a soda tax on the books are Berkeley and Philadelphia. Siegel said recent research shows that a consumption tax discourages citizens from downing large quantities of high-calorie, sweetened drinks, which are associated with diabetes, obesity and heart disease.

They also have a “double whammy” effect of raising money that can be spent on other public health initiatives, Siegel said. Increasingly, states and municipalities are looking at sugar-sweetened beverages the same way they eyed tobacco in the 1980s and 1990s, as a source for additional tax revenue.

“I think that public health and policy makers are starting to apply the lessons that we’ve learned from the tobacco movement, to apply those to the issue of obesity and soda consumption,” Siegel said. “One of the things we learned is that taxing the cigarettes is a good way to reduce tobacco consumption and to raise revenue for anti-smoking programs.”

High-Dollar Campaigns

Beverage companies have taken notice and are pouring money into campaigns to stop the initiatives.

The American Beverage Association, a Washington-based trade group representing major drinkmakers such as PepsiCo Inc. and the Coca-Cola Co., has given well over $20 million to San Francisco- and Oakland-based groups opposing the initiatives, according to public disclosure records.

“We don’t think the goal of beverage taxes is public health. We think they are taxes that unfairly hurt our customers,” Susan Neely, president and CEO of the American Beverage Association (ABA), told Bloomberg BNA. She says a tax on soda isn’t the way to go, and points to public health initiatives sponsored by the industry to encourage Americans to exercise more and limit overall calorie intake.

Former New York City Mayor Michael Bloomberg has nearly matched the ABA contributions on the other side, giving more than $18 million to campaigns in support of the Oakland and San Francisco soda tax initiatives, finance records show.

Bloomberg is the founder of Bloomberg LP, the parent organization of Bloomberg BNA.

During his tenure as New York City mayor, Bloomberg took an interest in limiting consumption of high-calorie drinks. An effort to pass a similar tax in New York City failed, but his administration did impose a ban on large-sized sodas from convenience stores, restaurants and similar vendors in 2012. A court struck down that effort in 2014.

Cook County, where Chicago is located, is also set to levy a penny-per-ounce tax on sugared drinks. That measure is not on the ballot but is in the county’s proposed 2017 budget.

Spreading the Cost

Opponents argue that because the soda taxes would be imposed at the distributor level, not on customers, store owners would spread the cost around, giving slight markups to several types of products instead of one large price hike to soda.

“That’s essentially the problem with this initiative and why we believe it’s bad policy,” Joe Arellano, spokesman for the No Grocery Tax campaigns in the Bay Area, told Bloomberg BNA.

Arellano said that about seven out of 10 grocers would spread the cost onto other items, effectively raising grocery prices even for customers who don’t buy sugary sodas. He also characterizes the initiatives as a regressive tax in that they would hit lower-income families the hardest, as they generally spend a higher percentage of income on food.

But Siegel pushes back on that notion. Competition will keep store owners from raising the price of non-soda products, he said. “No grocery store is going to increase the prices on non-soda products so that it can no longer compete with other stores. It would make no sense,” he said.

And that’s why the regressiveness argument doesn’t hold water for Siegel, either. “If you are addicted to smoking, you don’t have a choice,” he said. “But with soda, this is a completely voluntary choice. That is key.”

But Do They Work?

The ABA’s Neely criticizes soda taxes as an oversimplification of complex health issues.

“I think it’s a false framing to oversimplify a multifactorial problem like obesity and present a tax as a solution,” she said. “First of all, obesity has many causes, and second, taxes have not been proven to change behavior.”

Some in academia disagree that a tax wouldn’t change spending patterns. A June 2015 study in the American Journal of Preventative Medicine found that implementing a 1-cent-per-ounce tax on sugary drinks would likely lead to a 20 percent reduction in consumption and pointed to Mexico’s nationwide 1-peso-per-ounce tax on sugar-sweetened beverages.

“People instead are just switching to non-taxed beverages, mostly bottled water, which is often sold by the same companies,” Michael Long, a professor of public health at the George Washington University, told Bloomberg BNA.

Long, who co-authored the study, said he’s found that in Mexico, nearly all the costs were passed onto the end price of the soda, not spread to other grocery products. Early data on the program in Berkeley show that a small portion of the tax is being spread to other items, however.

Long’s study also found that implementing a nationwide soda tax in the U.S. would generate about $12.5 billion in annual revenue and save $23.6 billion in health-care costs over a 10-year period.

And a nationwide soda tax could be possible in the long term, he said. If the initiatives pass and other major cities begin taking a serious look at similar provisions, the beverage industry could begin to favor action at the national level, similar to how the food industry ultimately pushed for a nationwide standard for labeling genetically modified foods over a state-by-state system, Long said.

But in the short term, the industry is likely to continue to battle local soda tax initiatives. The ABA and other groups sued Philadelphia over its tax, which is set to go into effect Jan 1. That case is ongoing.

Neely says that her organization will continue to advocate for health initiatives that reduce obesity, and the organization has rolled out an initiative to reduce beverage calories consumed per person by 20 percent before 2025.

“I’m pushing back on this false framing that pro-tax activists have some kind of high ground,” she said. “There’s plenty of high ground that’s been staked out by other public health organizations that’s multifaceted, and we’re proud to be a part of those.”

To contact the reporter on this story: Casey Wooten in Washington at cwooten@bna.com

To contact the editor responsible for this story: Paul Hendrie at phendrie@bna.com

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