08 Jun Soda Tax: A Tale of 7 Cities
For years, obesity has been a problem in America, and that problem continues to grow. According to records, 35% of Americans are obese. The Centers for Disease Control and Prevention even calls the problem of obesity a national epidemic. It is not just a problem about weight; it is a serious problem with health. One of the major reasons for obesity is sugar—sugary food and sugary drinks.
As obesity becomes a national concern, some areas in the United States have chosen to tax sodas or sugary drinks. It is like hitting two birds with one stone: the local government earn from sugary drinks, and people are now more conscious about buying these drinks. This surcharge is called a sugary drink tax or soda tax. The main goal of the tax is to reduce intake of drinks with added sugar among constituents. These include carbonated soft drinks, energy drinks and sports drinks.
Soda tax, though, is still highly debated. Of course, large softdrink companies Coca-Cola and Pepsi are against such tax imposition. But they are smart and are great marketing players. Why else would they sell sugary drinks that have no sugar? That’s a marketing ploy and a wise strategy that beat this so-called soda tax. These companies are also rich enough to fight imposition of the soda tax so that no state in the United States has actually passed this sugary drink tax. They have started campaign strategies in some states where the sugary tax law was supposed to be tackled and voted on.
What are the cities in the United States with soda tax?
Since cities and counties have their own sets of laws, six local governments actually have soda taxes paid for by distributors of the sugary drinks. The local governments are the following:
The state of California has the most cities with soda tax, Albany being one of them. The tax imposition was approved by voters during the 2016 General Election for a Sugar-Sweetened Beverage General Tax. The tax calculation is one cent per ounce of sugar-sweetened beverage.
Albany actually has the highest approval rating for the regulation as 71% of voters voted for it. That year 2016 was very important for the sugary drink industry as four cities were voting on the soda tax. Both sides of the soda tax debate spent so much to campaign for or against the tax imposition. It was even known as the most expensive city-level issue voting in the history of America. In a Vox report, it was learned that the anti-soda tax group spent over $36 million in a bid to influence voters against voting for the tax measure. Of this amount, over $30 million was spent by the American Beverage Association, while around $4.7 million was spent by Coca-Cola and another $2.1 million by Pepsi. On the other hand, only close to $12 million was spent by the other side. Former New York City mayor and one of the richest men in America, Michael Bloomberg, spent around $9.1 million in the fight to pass the soda tax in 2016. The Laura and John Arnold Foundation spent $2.5 million for the same fight, while the American Heart Association spent $300,000. Despite the disparity in monetary spending in favor of the side against the passing of the soda tax, the residents of Albany chose to vote for the surcharge anyway.
The city is the earliest local government to pass a soda tax known as the Sugar-Sweetened Beverage Product Tax in 2014. Products included in the surcharge imposition are sodas, energy drinks and heavily pre-sweetened teas. Also included in the tax are the added caloric sweeteners like syrup that is used in fountain drinks. The same with Albany, the tax was a cent for every ounce of the sugar-sweetened drink. According to a report, the additional tax in Berkeley reduced sugary drink consumption in the area by 20%.
Also passed in November 2016, the Sugar-Sweetened Beverage Distribution Tax or the Oakland Soda Tax was supported by 61% of voters. It provides that every fluid ounce of soda, energy drink, sweetened tea, juice and even sweetened water will be taxed by a cent. The goal of the tax is to promote public health and to fund community development programs. However, in the case of Oakland, the tax goes to the general fund, which can be used for any government programs. However, the city is still required to fund health promotions and community programs even if it is not clear that the funds specifically came from the soda tax.
The city also formed the Soda Tax Advisory Board, which is tasked at recommending programs that will prevent health problems following the consumption of sugary drinks.
San Francisco, California
Also passed during the hype of the soda tax in November 2016 is the Sugary Drinks Tax of San Francisco. But it wasn’t until 2018 that the tax was implemented for transfer sugar-sweetened beverages and syrups or powders. The rate is one cent per fluid ounce of the sugary drink.
Over 61% of the voters supported the tax, but it wasn’t the first time that this went into referendum. In 2014, majority of the voters supported the soda tax in San Francisco, however, the referendum required two-thirds votes. The tax rate is one cent per fluid ounce of the sugary drink, just like most of the other cities.
The Sugar-Sweetened Beverage Product Distribution Tax in Boulder was passed during that heated year of 2016. The tax imposed in the city for sugar drinks is the most expensive at two cents per ounce of the beverage and those with sweeteners. Tax revenue is used for the promotion of health and general wellness of the population. The tax also aims to prevent chronic diseases caused by sugar or due to obesity.
Known as the Philadelphia Beverage Tax or Philly Bev Tax, the law imposes tax on “any form of caloric sugar-based sweetener, including but not limited to sucrose, glucose, and high-fructose corn syrup. Caloric sweeteners also include sugars from concentrated fruit or vegetable juices that are in excess of what would be expected from the same volume of 100% fruit or vegetable juice of the same type.” So these include energy drinks, non-alcoholic cocktail mixes, pre-sweetened coffees and teas, sports drinks and sweetened water.
Revenue from the soda tax in the city will be used to fund pre-kindergarten and community schools, parks and recreation centers, libraries and other projects that will benefit the public especially those in the lower-income category. The goal is for these programs to aid in the fight against poverty and criminality, which will also result in the improvement of the economy.
The tax is at 1.5 cent per ounce of sweetened beverage.
Also starting in 2018, the Sweetened Beverage Tax in the city of Seattle became a law. The tax was passed by the Seattle City Council with a vote of 7-1. During the first four months of the implementation of the tax regulation, it was reported that Seattle earned $4 million from the soda tax alone.
In these six cities, the sugary drink tax is collected from the distributors. This means that consumers don’t need to pay additional sales tax to the drink when purchased.
Other areas tried to follow suit when it comes to passing legislations on the imposition of surcharge on sugary drinks. Cook County, Illinois actually succeeded in passing a similar legislation in November 2016 requiring sugary drink distributors to pay tax of one cent per ounce of sweetened drink. Less than a year later, the tax law was repealed.
Arizona and Michigan, as a state, preempted the passing of any local government sugary drink tax. California also has a similar preemptive legislation that banned local governments from establishing a new tax for 12 years starting in 2018. The four cities with the soda tax are no longer covered.
Why only a few cities passed a sugary drink tax
It seems like a soda tax is very noble: it stops people from consuming more sugary drinks and the tax is usually spent on health or development programs. But it is quite disconcerting that only six local governments actually passed a soda tax. Some say that having a sugary drink tax is regressive because it is the lower-income people who are hit the hardest. While the soda tax is collected from distributors, it is highly likely that distributors will increase their prices in order to accommodate the tax. It’s a business and companies would always pass the tax to consumers no matter how indirect it is. The slight increase in the price of sugary drink may not have a large impact on wealthier individuals, but for people in the lower-income bracket, the effect is quite significant.
Also, those who lobby against the soda tax will argue that sugary drinks are not the only reason for obesity. They have a point. Unhealthy eating habits coupled with a sedentary lifestyle are major reasons for the obesity problem in America.
Obesity, though, is a worldwide problem, which is why the soda tax is not something unique to the United States. However, unlike in other countries, the soda tax is actually national legislation. According to reports, Denmark was the first country to legislate the soda tax. Surprisingly, the country did so as early as in the 1930s. Other European countries passed similar laws after 2010: Finland and Hungary in 2011, France in 2012, Mexico in 2013 and United Kingdom in 2016.
People have treated the soda tax as similar to the tobacco tax. The two have parallelisms with soda tax aimed at reducing obesity and diabetes, and the tobacco tax at cancer. The rationale is that sugary drinks and cigarettes are not necessary for one’s survival, therefore, it is not a grave federal sin if these items are taxed.
Plausible in the national level
If other countries are doing it, then the United States can also do it. According to non-profit organization Urban Institute, sugar tax in the national level is feasible. However, it advises doing so by sugar content rather than by volume. It states that the National Government already taxes alcoholic drinks according to its alcohol content.
“As systems are developed, the formats of early-adopted drink taxes are likely to influence the development of these taxes throughout the United States,” the Urban Institute researchers said. “Local governments should consider their policy goals as they develop these taxes. If policymakers are proposing taxes on sweetened beverages to discourage sugar consumption, they should give close consideration to basing those taxes on sugar content, which is feasible and legal in many jurisdictions. If, however, their primary goal is revenue collection, taxes on drink volume or sales value might be preferred because of their efficiency.”
The danger of taxing sugary drinks by volume is that it discounts sugar content, which was the essence of the tax in the first place. The goal is to lessen sugar consumption, not liquid consumption. That is also what most countries aside from the United States is doing: taxing sugar content. It is also quite easy to measure as sugar content is required to be placed in the nutritional level.
Should the government now start taxing all other unhealthy food?
It would seem like a very hard battle to win if health buffs will now try to target all unhealthy food and force government to enforce new taxes in order to limit the consumption of junk food. But if the soda tax could not gain support from a single state, an unhealthy food tax will unlikely find a champion. Consumption of unhealthy food is directly linked to diseases like obesity, diabetes and hypertension. It’s a good thing that navigating what is unhealthy may be more complex than identifying sugar. This would be a long and unhealthy discussion that would lead to an even more unhealthy discussion when complemented with the tax issue.
But what this sugary drink tax brings to the table aside from the surcharge is a discussion. People are actually talking about it, which eventually leads to discussion on why the tax came about. The real advantage of the sugary drink tax is that people are actually talking about the ills of sugar in one’s health and that it potentially causes diabetes and obesity. Perhaps, without the need of passing a soda tax, some people will stop or at least reduce sugary drink consumption for health reasons.