California soda tax bill stalled until next year

(source)

Dive Brief:

  • A California bill proposing a statewide tax on sugary beverages did not pass necessary committees in order to be considered by the full body this year and has been shelved until next year, according to a release the bill’s sponsor sent to Food Dive. Assembly Bill 138 would place a 2 cent per fluid ounce tax on soda and other sugary drinks.
  • The California Chamber of Commerce, grocery stores and the beverage industry came out against the bill. The Howard Jarvis Taxpayers Association projected that the tax could create more than $3 billion in new costs for people in California, according to CNBC.
  • “While this is not the outcome I had hoped for, AB 138 remains alive in the legislative process, albeit on a slower track,” Assemblyman Richard Bloom, who authored the measure, said in the release. “This delay is unfortunate because, with the health outcomes of millions of Californians at stake, there is no time to lose. On the other hand, we will now have the time to build an even bigger and stronger coalition of supporters.”

Dive Insight:

The momentum for taxes on sugary drinks has been a rollercoaster in recent years. Although some cities and counties have successfully passed taxes, many have been thwarted by soda companies who have paid big bucks to campaign for their rejection and angry consumers. This latest setback could be a sign that the soda industry’s efforts to trump and stall the taxes have been largely successful. 

Bloom said the measure is becoming a “two-year bill” — the term for legislation that does not pass fiscal committees by the deadline. It will remain in the Assembly Revenue & Taxation Committee and continue through the legislative process next year.

According to CNBC, this is Bloom’s third try to pass a soda tax. But he isn’t the only one. California lawmakers have introduced five bills with the goal of reducing consumer consumption of sweetened drinks using new taxes, warning labels and limits on sizes and product placement.

The shelving of this bill is a big win for the soda industry. The Los Angeles Times reported the industry spent nearly $12 million in California on these issues during the past two years. And its not just California. Big soda companies, including Coca-Cola, Pepsi and Keurig Dr Pepper, have spent money nationwide on campaigns to ban grocery taxes — often soda taxes by another name. By convincing voters these taxes will only make essential products cost more, the industry has seen success in several states.

Lobbying and advertisements have helped in some ways, but soda companies have had problems moving past concerns that sugary drinks lead to health issues. This latest bill, which is supported by groups representing medical practitioners and activists, argues there is a direct connection between drinking sugary beverages and developing diabetes, obesity and heart disease. It would have used the tax revenue raised to help fund a program to lower the costs of treating those health issues.

Several soda taxes are successful. A recent study used five years of data from Berkeley, California — the first U.S. city to tax soda — and found a 52% decrease in soda consumption in the first three years the tax was in place. Additionally, after two months of Philadelphia’s soda tax, a study found residents were about 40% less likely to drink sugary drinks every day than people elsewhere.

But soda taxes have also been problematic. A penny-per-ounce soda tax in Cook County, Illinois, which includes Chicago, was repealed just three months after it went into effect. The tax, which was passed by the county’s board of commissioners, was deeply unpopular with residents. According to a poll from the Illinois Manufacturers’ Association, four out of five residents thought the tax was created primarily for the county to make money.

In Philadelphia, a 1.5-cent-per-ounce sugary drink tax has been unpopular with soda companies, retailers and consumers from the start. Studies have shown the tax has inspired consumers to drive outside of the city limits to purchase non-taxed sugary drinks. And grocery stores and distributors have seen smaller basket sizes, fewer sales and layoffs because of the tax. Though Philadelphia’s tax was upheld by the Pennsylvania Supreme Court earlier this year, city council is considering legislation to repeal it — and has passed a bill for a study to show its economic consequences. The tax is becoming a major issue in the coming city elections, with the American Beverage Association spending $604,000 on attack ads against Mayor Jim Kenney, who championed the tax.

But decisions about soda taxes are not all political. A federal appeals court also recently ruled that a San Francisco law requiring health warnings on soda and sugary beverage advertisements was unconstitutional. 

Overall, consumers have been drinking fewer soft drinks and the market has struggled with declining sales as consumers choose better-for-you options. Soda has been working to make a comeback with new flavors and innovations. If the industry can afford to keep fighting off and shelving these proposed taxes and health warnings, then soda could come out on top again.

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