Berkeley finds it’s not easy imposing soda tax

berkeley measure d 2The city of Berkeley, Calif., is finding it’s not so easy imposing a soda tax. Since the tax’s Jan. 1 imposition, retailers find it’s a burden changing prices for just one type of item in one city.

Measure D, officially the City of Berkeley Sugary Beverages and Soda Tax, last November overwhelmingly was passed by 76 percent of city voters. The tax is a penny per ounce. So a 16-ounce Coke would be hit with 16 cents. There are exceptions for small businesses.

The measure passed even though the soda industry spent $2.4 million against it, an estimated $30 per registered voter. Opponents warned of increased costs to consumers.

The pro-Measure D coalition called itself Berkeley vs. Big Soda. It maintained on its website, “We face a serious health crisis: 40% of kids will get diabetes in their lifetimes unless we do something about it. The link between sugary drinks and diseases like diabetes is undeniable.”

Former Labor Secretary Robert Reich, a Berkeley resident, wrote in the Huffington Post in favor of the tax, “Berkeley’s Soda War pits a group of community organizations, city and school district officials, and other individuals (full disclosure: I’m one of them) against Big Soda’s own ‘grassroots’ group, describing itself as ‘a coalition of citizens, local businesses, and community organizations’ without identifying its members.”

The text of Measure D claimed “this Ordinance is to diminish the human and economic costs of diseases associated with the consumption of sugary drinks by discouraging their distribution and consumption in Berkeley through a tax.”

Measure D set up a new bureaucracy, the Sugar Sweetened Beverage Product Panel of Experts, to recommend to the City Council how to spend the taxes collected.

Compliance

But things are turning out more complicated than expected. Camilo Malaver co-owns the San Francisco-based Waterloo Beverages company, reported Berkeleyside. “In January, when the tax was implemented, Malaver decided to stop restocking his supply of craft sodas and naturally sweetened beverages in Berkeley to avoid further confusion. … His frustration was aimed primarily at the city for what he saw as a poor job relaying information on how to comply with the tax.”

Malaver said, “Berkeley is a good city to do business with the university, but now, it’s tough. We’re in limbo. Everybody’s lost and [we] don’t know what to do.” The university itself, as a state entity, is exempt from Measure D.

A problem is that the soda market has changed from the days when the market mainly was such Big Soda suppliers as Coca-Cola and Pepsi. As with the craft brew markets for beer, “craft sodas” have popped up like those sold by Malaver.

When potentially hundreds of different items are involved, that complicates trying to figure out if a beverage is taxed, or is exempt. For example, the ordinance taxes “heavily presweetened tea,” but not regular tea, or slightly sweetened tea.

The big distributors offering a limited number of different drinks more easily can comply than can the small or medium outfits. As Berkeleyside notes, “All but one of the distributors who spoke to Berkeleyside were small- to medium-sized local distributors that sell craft sodas, sweetened teas and energy drinks.”

The confusion over what to tax also is reminiscent of the controversy over the statewide 1991 Snack Tax. As part of a $7 billion tax increase to close the budget deficit of that year, the tax was imposed on formerly exempt snacks. Except that some snacks, such as nuts, remained exempt. But it wasn’t clear whether candy with nuts was taxed, or exempted.

The Los Angeles Times reported in October 1992, “SACRAMENTO — A year and a half ago, part of the answer to the state’s dire need for higher revenue was extending the sales tax to snack foods, candy and bottled water, passed by the Legislature and signed by Gov. Pete Wilson.

“Today, with the signatures of nearly a million Californians standing behind Tuesday’s ballot measure to repeal the tax, no one — not the governor nor a single lawmaker who voted for it — has stepped forward to support keeping the tax.”

On Nov. 3 that year, two-thirds of voters backed Proposition 63, which repealed the tax.

Dollar Tree

Meanwhile, one large outfit affected by the Berkeley soda tax is discount chain Dollar Tree. A 16-ounce soda formerly cost $1, plus Berkeley’s 9-cent sales tax. (In California, sodas are taxed, unlike most other food). Now on top of that is placed the new soda tax of 16 cents (1 cent per ounce). Total: $1.25.

Berkeleyside reported in January, “Dollar Tree — which sells a variety of products for $1 or less and has more than 5,200 stores in North America — decided to pull out sodas in its Berkeley stores when the soda tax went into effect on Jan. 1, according to Randy Guiler, vice president of investor relations.”

Guiler said, “Due to the increased cost from the Berkeley sugary drinks and soda tax, we are no longer able to carry sugary drinks and soda at the one-dollar price point.”

Ironically, Dollar Tree still sells fruit juice, even when it is saturated with sugar, because the beverage is not subject to the new tax.

Future taxes

A 2013 bill for a statewide soda tax, SB622, died in committee. It was by state Sen. Bill Monning, D-Carmel. According to the March 2 Sacramento Bee, it’s unlikely to come back in the Legislature any time soon.

A tax increase still requires a two-thirds vote in both houses of the Legislature. With Republican gains last year in the Legislature, Democrats’ two-thirds supermajority is long gone. And if there’s one thing Republicans can agree on, it’s opposing higher taxes.

That leaves anti-soda forces hopeful that Berkeley’s example can be poured out into other cities, even though 30 previous tries have failed.

5 comments

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  1. bob
    bob 3 March, 2015, 18:22

    Tax’em to the stoneage, son! And if that won’t work outlaw it. And if that won’t work lock ’em up! That’s the way of the DemoNcrat.

    Reply this comment
    • YoMan
      YoMan 4 March, 2015, 11:13

      Candy bars, sweet snacks, bakeries and restaurant deserts next….march on progressive Comrade soldiers!

      Reply this comment
  2. DavidfromLosGatos
    DavidfromLosGatos 4 March, 2015, 15:36

    Sounds like Berkeley voters got exactly what they wanted: prohibition of “sugary drinks”. In some cases, the prohibition is due to uncertainty (so-called craft sodas), and in some cases the prohibition is to to the increased price (Dollar store chain). Either way is a win for the voters. Unless, of course, what they actually wanted was the tax money. Some consumers may be annoyed, but they were outvoted. elections have consequences, and all of that.

    Reply this comment
  3. Ulysses Uhaul
    Ulysses Uhaul 4 March, 2015, 19:50

    Survival. Adaptation.

    The more laws, regulations and taxes only creates anger and noncompliance among the masses.

    Reply this comment
  4. morejoy
    morejoy 9 March, 2015, 23:45

    Hooray! Let there be no doubt the ultimate goal of the soda tax is the reduction of consumption of sweetened beverages to halt the ravaging health effects associated with these products. Again Hooray for Berkeley ‘ s sugar sweetened beverage tax. First of it!s kind! This effort is new, a prototype.

    Reply this comment

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John Seiler

John Seiler

John Seiler has been writing about California for 25 years. That includes 22 years as an editorial writer for the Orange County Register and two years for CalWatchDog.com, where he is managing editor. He attended the University of Michigan and graduated from Hillsdale College. He was a Russian linguist in U.S. Army military intelligence from 1978 to 1982. He was an editor and writer for Phillips Publishing Company from 1983 to 1986. He has written for Policy Review, Chronicles, LewRockwell.com, Flash Report and numerous other publications. His email: [email protected]

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