Daily Tax Report: State provides authoritative coverage of state and local tax developments across the 50 U.S. states and the District of Columbia, tracking legislative and regulatory updates,...
By Che Odom
Advocates of soda taxes point to a legal victory in Pennsylvania and adoption of a Seattle ordinance this year as evidence their campaign is succeeding.
Their side includes grassroots groups, the American Heart Association and individuals, including a billionaire, who are committed to linking public health and taxes.
The beverage industry, however, is pushing hard against increasing local and state efforts to tax and lobbying for state-level laws that preempt localities from enacting taxes on sweetened drinks.
“Taxing food won’t make us healthier, but it will hurt our economy and make life more difficult for struggling families,” Americans for Food & Beverage Choice, spearheaded by the American Beverage Association, told Bloomberg BNA in a statement.
Earlier this month, Seattle’s city council and mayor enacted a 1.75 cents per ounce tax on distributors of sweetened beverages that is intended as a public-health measure to inhibit the consumption of sugary drinks.
Soon after, on June 14, Philadelphia’s soda tax got a boost when a seven-judge Commonwealth Court panel upheld the city’s 1.5 cent-per-ounce tax on sweetened beverages.
So far, nine localities have some tax on sweetened drinks. They are Seattle; Philadelphia; Cook County, Ill.; Boulder, Colo.; and four cities in California: San Francisco, Oakland, Berkeley, and Albany.
This year, attempts to enact soda taxes in Santa Fe, N.M., Illinois, Massachusetts, and West Virginia failed.
Advocates of the tax have pledged to continue pushing for tax in those jurisdictions, with a particular focus on Illinois, according to representatives from the American Heart Association and Grassroots Change, a nonprofit that helps organize community-action efforts. Karen Larimer, a volunteer with the American Heart Association who worked on the Cook County legislation, told Bloomberg BNA that budget problems in Illinois combined with the success of grassroots health advocates would make a winning argument statewide.
Illinois’ Legislature, which is meeting in special session to address the current budget crisis, hasn’t passed a comprehensive budget for two years and hasn’t enacted major tax changes in that time.
More cities and local governments are considering taxes on sugary beverages. Some have approached Larry Tramutola, a political strategist who led ballot initiatives in California. He wouldn’t identify to Bloomberg BNA which cities or community groups have approached him for assistance, calling that information “confidential considering the aggressiveness” of the beverage industry.
Advocates for soda taxes most often ask Tramutola for advice on establishing a time frame for their campaigns, building coalitions, and countering the beverage industry’s public-relations “machine” and overwhelming resources, he said.
Former New York Mayor Michael Bloomberg, whose philanthropy supports anti-smoking campaigns and other health initiatives, supports the soda tax and has donated to groups that supported its passage.
Tramutola said the successes in California may not have occurred if not for the financial support of Bloomberg, who is the founder of Bloomberg L.P. Bloomberg BNA is an affiliate of Bloomberg L.P., the global business, financial information and news leader.
While grassroots groups may push for the taxes as a way to encourage better health, local governments are also looking at them “as a way to shore up state and local budgets,” according to John Buhl, media relations manager of the right-leaning Tax Foundation.
“Although it might be more politically expedient to tax a demonized product like soda to pay for popular services, this represents bad fiscal policy,” Buhl wrote in March.
The taxes are regressive, he said. For example, a 10 percent soda tax could burden high-income families by $24.29, while poor families would be harmed nearly twice that amount at $47.38.
Most of the taxes, however, are between 1 percent and 2 percent.
“Ideally, public services should be funded by taxes with a broad base and low rate,” he said. “Soda taxes are the opposite, subjecting a narrow tax base to very high tax rates.”
Cook County, with 5.2 million residents, is projected to raise more than $200 million a year from its tax, starting July 1. San Francisco estimated it would raise $15 million per year from its initiative, and the Oakland, Calif., measure was projected to generate $6 million to $10 million.
Earlier this month, Philadelphia announced it would lower its projections for soda tax revenue in the current fiscal year after collections came in lower than expected. The city has collected only $25.6 million from the soda tax since Jan. 1, about $20 million below projections for the fiscal year ending in June.
To contact the reporter on this story: Che Odom in Washington at COdom@bna.com
To contact the editor responsible for this story: Ryan C. Tuck at email@example.com
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