In 2010, Washington voters repealed a soda tax established by the state Legislature. Initiative 1107, adopted with 60 percent of the vote, unwound taxes on bottled water, soda pop, candy and certain processed foods. The tax on carbonated beverages, two cents per 12 ounces, was a major focus of the campaign. The American Beverage Association funded most of the $16 million I-1107 campaign.
The initiative was highlighted in a Washington Post story in July 2010 under the headline, Soda taxes fizzle in wake of industry lobbying.
When Washington state passed a tax on soda and other sugary beverages in April, it seemed like momentum was building nationally for a new kind of tax. Washington’s law, which imposes a tax of 2 cents for every 12 ounces of soda, came on the heels of similar actions in Maine and Colorado…
The WaPo noted the failure of legislative efforts to pass soda taxes in Mississippi, New Mexico and New York state, as well as the repeal of the tax in Maine.
Now, with Philadelphia becoming the second metro to adopt a local soda tax (Berkeley, California is the other), pundits are speculating that the tide may be shifting. The Philadelphia tax, 1.5 cents per ounce, bucks a trend.
Soda tax proposals like Philadelphia’s have failed in more than 30 cities and states in recent years, including twice in Philadelphia. Such plans are typically criticized as disproportionately affecting the poor, who are more likely to consume sugary drinks.
Democratic Mayor Jim Kenney sold the council on the idea with a plan to spend most of the estimated $90 million in new tax revenue next year to pay for prekindergarten, community schools and recreation centers.
And it’s not over. The beverage association spent millions in advertising to oppose the tax and vows to continue the fight.
The association and beverage bottling businessman Harold Honickman promised to fight the tax in court, with Honickman saying the tax would mean sales will go down and jobs will be lost. He said he could file a lawsuit as soon as this weekend.
The Tax Foundation saw this coming. In a December 2015 piece, TF wrote,
Soda taxes are poised to be on the agenda in many cities in 2016, an effort spearheaded by former New York City Mayor Michael Bloomberg. After a long string of rejections—including in New York City itself, where the city that never sleeps refused to sacrifice its caffeine fix—advocates of a tax on sugary beverages finally secured a victory in Berkeley in 2014, a success which advocates hope to parlay into efforts in as many as a dozen cities in 2016.
The foundation adds,
An excise of one cent an ounce—twelve cents a can, 68 cents per two liter bottle, or $2.88 per 24-pack—is emerging as the game plan in cities considering such a tax. Four states already impose excise taxes on soft drinks, albeit at much lower rates; Berkeley’s excise is imposed at more than six times the rate of Arkansas’ tax, previously the nation’s highest.
Last month, Governing magazine wrote that efforts, like that in Philadelphia, may gain momentum as a result of research touting the health benefits possibly associated with reduced consumption of sugary drinks (Philadelphia extended the tax to diet soda). More on this in the Tax Foundation report, which notes inconsistencies in application and effectiveness.
In other words, soft drink taxes fall on some sugary drinks but not others. More to the point, even to the extent that they are intended to address the problem of obesity, they do so only incidentally.
Yet, again, as reported in Governing, the economic arguments pointing out the regressivity of the tax and its effect on small businesses also carry weight.
So far, though, these taxes haven’t been popular with voters. They’ve been rejected 43 times over the past several years at the state and local levels, according to Lauren Kane, senior director of communication for the American Beverage Association.
“These taxes are regressive, they fall hardest on people with the lowest [income],” said Kane. “It would also impact small businesses across the map, from delivery trucks to movie theaters to mom-and-pop corner stores.”
An article in the liberal publication, The Nation, published before the tax was adopted carried a headline noting the odd politics of the soda tax: A Soda Tax Is Fundamentally Regressive. What if It’s Philadelphia’s Best Hope for Progressive Change? And it implicitly tied the tax to other municipal experiments, like minimum wage, predictive scheduling and paid leave:
If Kenney succeeds in taxing the beverage companies, even at a less robust level, Big Soda runs the risk of becoming the next go-to industry for revenue-starved city governments looking to bring support and services to its residents.
As the federal government remains gridlocked and state governments are largely controlled by the Republican Party, cities have become some of the most fertile spaces for progressive change in this country.
Coming soon to a city near you? Or, possibly, soon to be revived as lawmakers grapple with the school funding challenge in 2017?
Something to watch.