Soda Tax just more revenue?

Good morning! Happy Monday.

What is being billed as a “common sense” ballot initiative to tax sodas one cent per ounce in Oakland has no hard requirement for how the money should be used. 

While advocates say it’ll fund programs fighting obesity-related public health problems, the lack of specificity in how the money will be spent raises questions about the city’s decades-long financial troubles. 

CalWatchdog has more. 

In other news: 

• The choice of Madeleine Albright — who served as the first female U.S. secretary of state — as a commencement speaker has caused a backlash at the all-woman Scripps College in Claremont, reports the Los Angeles Times. Some students have denounced her as a “war criminal,” while others oppose her position that “there’s a special place in hell” for women who don’t support Democratic presidential candidate Hillary Clinton.  
• While Republican legislative leaders have yet to endorse presumptive GOP presidential candidate Donald Trump, San Diego Mayor Kevin Faulconer is holding out as well. According to The San Diego Union-Tribune, Faulconer doesn’t support the business tycoon’s “divisive rhetoric.”
• With CA Attorney General Kamala Harris looking increasingly likely to be the top vote getter in the primary for U.S. Senate, the real battle is for second place, reports Capitol Weekly. 
• More digging from The San Diego Union-Tribune into Rep. Duncan Hunter’s campaign finance disclosures show purchases of groceries and gas. While these are not entirely uncommon in campaign finance disclosures, they do raise red flags after the Alpine Republican purchased “video games, oral surgery, private school tuition, a garage door and unspecified items at a Coronado surf shop” with campaign funds. 

Assembly:

– In at 1 p.m. Packed Revenue and Taxation Committee hearing at 2:30 p.m. 

Senate:

– In at 2 p.m. Packed Appropriations Committee hearing at 10 a.m. 

Gov. Brown: 

– No public events scheduled. 

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“Today, San Francisco has sent a clear message that we need to do more to protect our community’s health,” said Supervisor Scott Wiener, in a prepared statement. “These health warnings will help provide people information they need to make informed decisions about what beverages they consume. Requiring health warnings on soda ads also makes clear that these drinks aren’t harmless – indeed, quite the opposite – and that the puppies, unicorns, and rainbows depicted in soda ads aren’t reality. These drinks are making people sick, and we need to make that clear to the public. All three pieces of legislation passed today will improve the health of our community.”

“This prohibition on advertisements for sugar sweetened beverages will align our city’s policies closer with our existing public health goals,” Supervisor Malia Cohen said in the same release. “Our residents, particularly our youth, deserve to be in an environment where residents are exposed to messages and advertisements that promote health, not harmful substances.”

The three ordinances and their requirements are detailed below:

• “Supervisor Wiener’s legislation requiring health warnings on all posted advertisements for sugar-sweetened beverages with 25 or more calories per 12 ounces. The warning will read the following “WARNING: Drinking beverages with added sugar(s) contributes to obesity, diabetes, and tooth decay. This is a message from the City and County of San Francisco.” The size of the warnings will be at least 20 percent of the ad space, which is the standard required by the FDA on tobacco warnings. The warnings will only apply to advertisements posted after the effective date of the legislation.
• “Supervisor Cohen’s legislation will prohibit the placement of advertisements for sodas and sugar-sweetened beverages on city owned property. Currently, tobacco and alcohol advertisements are subject to this prohibition. There will be an exception for permitted events in public spaces, like Outside Lands in Golden Gate Park, where the permit and lease can grant separate rules.
• “Supervisor Mar will introduce legislation that bans the use of city funds, whether by city departments or city contractor, on the purchase of sodas and other sugar-sweetened beverages.”

The ordinances do not require warning labels on individual bottles or cans.

“The new warning label requirement on sugary drink ads does exactly what the beverage industry has long called for: provides consumers with education. Now, for every advertising message saying ‘live for now’ or ‘open happiness,’ consumers will also receive a science-based reminder that these products contribute to diabetes, obesity and tooth decay,” Dr. Harold Goldstein, executive director of California Center for Public Health Advocacy, said in a prepared statement.

The San Francisco Board of Supervisors previously passed a resolution in support of Senate Bill 203, introduced by Senate Majority Leader Bill Monning, D-Carmel. SB203 would have made California “the first state to require health warning labels to be placed on sugary drinks, including sodas, sports drinks, and energy drinks.” The bill failed to clear the Senate health committee and will be eligible for reconsideration on January 2016.

In 2014, The Field Poll released survey results revealing “broad voter support for posting a health warning label on sodas and sugary drinks and taxing their sale to provide funds for school nutrition and physical activity programs.”

But opponents to the ban say it isn’t fair to penalize sugary drinks and advertising.

“It’s unfortunate the Board of Supervisors is choosing the politically expedient route of scapegoating instead of finding a genuine and comprehensive solution to the complex issues of obesity and diabetes,” Roger Salazar, a spokesman for CalBev, told the AP.

“The beverage industry already provides consumer-friendly labels on the front of every can, bottle and pack we produce,” American Beverage Association vice president William Dermody wrote in an email to NPR. “A misleading warning label that singles out one industry for complex health challenges will not change behaviors or educate people about healthy lifestyles.”

All three ordinances go into effect 30 days after the mayor has signed the legislation.

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.

For Sixties survivors like me, it’s always amusing when Berkeley does something like this. The city has been open to medical-marijuana dispensaries. But pot famously gives people the munchies. Then Berkeley taxes what they want to munch! (Or swallow, in the case of soda.) What would the late Jerry Garcia say?

In the 1960s, Berkeley was the center of the “free speech” and hippy movements. Motto: Turn on, tune in, drop out.

But yesterday’s hippies are today’s politically correct commissars, in Berkeley and almost every other campus in the United States, as well is in many state legislatures, including California’s. Motto: Tax it, regulate it, ban it.

But Berkeley is a medium-sized city of 112,580. It will be easy for its inmates to buy the contraband sugar-water in neighboring San Francisco, Oakland, Emeryville, Piedmont or El Cerrito.

Of course, then the unhappy hippies will try to go for a regional or state soda taxes.

Yet San Francisco’s Proposition E soda tax — a much higher 24 cents on a can — lost. Albeit the threshold of passage there was higher, two-thirds, and it got 55 percent.

But a statewide tax likely would fail, as would a tax in most areas, including giant Los Angeles. Maybe Santa Cruz or other Pyongyang-influenced university towns might ape Berkeley and pass a tax.

Soon we should see stories of merchants in Berkeley decrying lost soda sales, which also would lead to lost sales in other areas because of fewer customers going into their stores.

Taxes do have consequences.

There have been a number of efforts to increase the tax on sugary beverages in California in recent years, with little to show for it so far. But the next battle in the soda tax war, in San Francisco next November, could make or break the sour-on-sugar movement.

Proponents argue that increasing the tax on sodas by one or two cents per ounce will prevent obesity, thereby saving millions of people from diseases like diabetes, and the government millions of dollars in health costs. Opponents consider it a Nanny State tax grab that will do nothing except transfer more money from the people to the government.

Mixed poll results

The soda taxers are encouraged by a Field poll of 1,184 California voters in February, which showed 68 percent favor taxing sugary beverages if the money goes to school nutrition and physical activity programs.

Support is highest among Latinos (79 percent) and Bay Area residents (75 percent). It’s lowest among whites (62 percent) and those who live along the South Coast (61 percent). Forty-eight percent overall said they would “strongly favor” a soda tax if the money went for those programs.

But when asked about the soda tax by itself, without reference to how the proceeds would be spent, 53 percent opposed it. Sixty-one percent of whites and Northern California residents outside of the Bay Area were in opposition. Latinos were the only group to support it. Fewer than one in four overall said they “strongly support” the tax, while 37 percent strongly oppose it.

“These findings confirm that widespread support exists for policies that combat obesity, including significant support for a tax on junk drinks to help finance school nutrition and physical activity programs,” said Robert Ross, president and CEO of The California Endowment, which funded the poll.

“Support for these efforts is even greater in communities that carry the greatest burden of illness and costs from obesity-related conditions. As a state we need to support creative approaches to fighting obesity in California.”

Voters reject soda tax

But when voters actually had to put their money where their mouths are, they strongly rejected the soda tax. In Nov. 2012, two-thirds of voters in Richmond voted down a 1 cent-per-ounce soda tax. On the same ballot, nearly two-thirds approved an advisory measure asking that if the soda tax passes, the proceeds should be used for youth sports and health education programs.

On the same day, 76 percent of the voters in El Monte, a suburb in Los Angeles County, voted down a 1 cent-per-ounce soda tax. The strong rejection occurred despite ballot measure language tying the tax to the funding of police, fire, emergency services, gang prevention, graffiti removal, youth nutritional/fitness/health programs, senior services and pothole repair.

San Francisco pushes ahead

Despite those soda tax slap downs, San Francisco’s supervisors are intent on placing a soda tax measure on the Nov. 2014 ballot. Supervisor Scott Wiener introduced an ordinance on Oct. 29 for an initiative that, if passed, would tax sugary beverages at 2 cents per ounce, twice as much as the Richmond and El Monte measures. An estimated $31 million is expected to be raised, which would be targeted at city and school recreation, nutrition and health programs.

Three weeks later, Wiener joined three other supervisors in introducing a similar soda tax ordinance, which will likely be combined with the first. The board has yet to take action. The tax measure would require two-thirds approval from voters to pass.

Wiener is not discouraged by last year’s soda tax failures, telling the San Francisco Chronicle that it “was too easy to attack” because it did not require spending the proceeds on health programs. In contrast, his measure “was carefully crafted to ensure the money is spent on nutrition, physical activity and health — and that it’s not used as a replacement” for existing public health dollars.

Health ‘epidemic’

Wiener put out a fact sheet warning of an out-of-control problem:

“We are experiencing an epidemic of health problems directly attributable to sugary beverages — including spikes in diabetes and obesity afflicting adults, teenagers, and even young children. Teenagers, particularly in low-income communities, are now being diagnosed with pre-diabetes or full-blown diabetes. These cases of diabetes are attributable to significant consumption of sugary beverages. 

“Sugar-sweetened beverages are different — and more extreme — than other sugary foods in terms of their negative health effects. Extensive data on how the body processes sugar-sweetened beverages demonstrate that these are more than empty calories. These drinks do not satiate hunger, unlike foods that eventually create a feeling of fullness.

“Sugar in these beverages can be consumed in large quantities in a very short period of time, effectively rushing the liver — which processes the drinks as toxins — with large amounts of sugar and leading to fat deposits … that give rise to diabetes, cardiovascular disease, and other diseases. The consumption of sugar-sweetened-beverages has also been shown to raise triglycerides, leading to increased risk of heart attacks and stroke.”

Soda industry responds

The beverage industry’s political arm, Californians for Food and Beverage Choice, responded to Wiener’s first ordinance by noting the soda tax defeats in Richmond and El Monte:

“Californians have rejected beverage taxes like the one San Francisco Supervisor Scott Wiener proposes because such measures are unnecessary, wasteful distractions from serious policymaking. Providing people with education, opportunities for physical activity and diverse beverage choices to fit their lifestyles are proven strategies for maintaining health.”

It responded to the second San Francisco soda tax ordinance with this statement:

“Regressive beverage taxes that raise the cost of living for consumers and hurt local businesses are no way to improve community health, and have been soundly rejected by voters each time they have been proposed.

“Fortunately, across the country, there is evidence that the prevalence of obesity may have peaked, and progress is being made through collaborative measures to provide nutrition education, opportunities for physical activity and delivering diverse beverages choices that fit a healthy lifestyle.”

Ironically, even without extra taxation, consumption of soda has been declining for several years as consumers switch to energy and sports drinks. The Field poll shows that only one in four strongly believe that Gatorade-type sports drinks contribute to obesity. But if those drinks contain more than 25 calories of sugar per 12 ounces, they could be taxed in San Francisco under Wiener’s ordinance.

Legislature stalls soda tax

There also have been several soda tax attempts in the state Legislature, all of them bottled up in committee. The latest was Senate Bill 622, which proposed a  1 cent-per-ounce tax on sugar-sweetened beverages.

It would have brought in an estimated $1.74 billion to state government. But due to a reluctance to take on the upfront costs to state government that would be required to collect the tax, the bill was placed in the Senate Appropriation suspense file in May. That allows it to be brought back for a vote in 2014.

“I remain committed to enacting SB622, as it will improve children’s lives and significantly reduce the amount Californians will pay to treat chronic diseases,” said the bill’s author, Sen. Bill Monning, D-Carmel, in a statement. He noted that it passed both the Senate Governance and Finance Committee and Senate Health Committee.

Committee debate

The debate at the May 1 Senate Health Committee hearing was a preview of the arguments to come in San Francisco.

“With the money collected from the sweetened beverage tax, we can start to reverse obesity trends and do the things we know we should to ensure that our children are healthy,” Monning told the committee. “We cannot afford to sit by while the obesity crisis overwhelms our health care system and shortens our children’s lives. A tax on sugary drinks is not the cure all, but it can be a valuable tool in a broader public health campaign.”

He was backed by Dr. Harold Goldstein, executive director of the California Center for Public Health Advocacy, who said that nearly 40 percent of children in California are overweight, and that 10 percent of Californians have diabetes.

“It’s expected that if the obesity epidemic isn’t turned around, a third of all children born in the year 2000, and half of Latino and African-American children, will have diabetes sometime in their lives,” said Goldstein. “Imagine what will happen with health care costs if diabetes rates double or triple.

“Sugar drinks are not the only cause of the obesity epidemic, and they aren’t treated as such in this bill. Instead, they are being held accountable for the unique and proven harm that they are doing to the health of Californians, especially California’s children.”

Bob Achermann, representing the California-Nevada Soft Drink Association, responded that information, not regulation and taxation, would accomplish a lot more toward the legitimate goal of curbing obesity:

“We share the concern over the problem. The question is the best way to address it. We think the marketplace is changing. There’s a wide variety of products available in the marketplace now. Low- and no-calorie products. The industry is doing a lot in terms of making more caloric information available to people on the packaging, on the container, on the package in the store, on the vending machine selection button, the fountain when you fill your cup.

“We think that accomplishes a lot more in terms of making people aware of the issue. Moderation in diet and the need for exercise is certainly the way to address obesity problems.”

Achermann warned that the tax could lead to increased beverage prices across the board, thereby negating any deterrent effect a soda tax might have on soda purchases.

“When you look at the beverage aisles or a vending machine, you will see prices are consistent across product lines,” he said. “So if you have a Diet Coke versus a regular Coke, the prices are still the same. We think this [soda tax] will raise the price on all products … and will simply raise a lot of money for the state, take a lot of money out of consumers’ pockets and not be good for the economy.”

After the bill failed to advance, the beverage industry issued this statement, “Thousands of Californians and local businesses joined our coalition to stop Senate Bill 622, which would have raised grocery prices and hurt business on which California livelihoods depend. This is the second time a tax like this has failed in Sacramento. Unfortunately, this fight isn’t over.”