Soda Taxes Approved in Four Cities, Vote Looms in Chicago's Cook County
November 09 2016 - 9:12AM
Dow Jones News
By Mike Esterl
The trickle of soda taxes is becoming a stream.
Voters in San Francisco, Oakland and nearby Albany Calif.
approved Tuesday a penny-per-ounce levy on nonalcoholic drinks with
caloric sweeteners affecting everything from cola to sports drinks
and ice tea to energy drinks. In Boulder CO, residents approved a
ballot measure calling for a tax of two cents per ounce.
And the week isn't over. Cook County's board of commissioners --
representing five million people in Chicago and surrounding suburbs
-- is expected to vote Thursday on a penny-per-ounce tax that also
would include beverages with zero-calorie sweeteners like diet
soda.
The taxes pose a rising threat to beverage industry giants like
Coca-Cola Co., PepsiCo Inc. and Dr Pepper Snapple Group Inc. after
they spent tens of millions of dollars in recent years successfully
opposing them in dozens of cities and states.
Philadelphia became the first large U.S. city to pass such a
measure in June, when the city council approved a levy of 1.5 cents
per ounce on nonalcoholic beverages with added sweeteners. The
beverage industry has sued to try to stop the tax before it goes
into effect in January.
Tuesday's ballot-measure victories in the three California
municipalities -- with a combined population of about 1.5 million
-- come two years after residents in the neighboring city of
Berkeley approved a penny-per-ounce tax.
The taxes are levied on distributors. At a penny per ounce, the
tax can increase prices by 20% or more if fully passed along to
consumers, according to industry trackers.
Even without special taxes, U.S. volumes of carbonated soft
drinks declined 1.2% in 2015, the 11th straight yearly decline,
according to Beverage Digest, an industry tracker. Many consumers
are switching to bottled water, which could surpass soda
consumption in the U.S. for the first time this year.
The long-term impact of sugary drink taxes on consumption
remains unclear. A recent study by researchers at the University of
California, Berkeley estimated consumption fell by about a fifth in
Berkeley's low-income neighborhoods in the months after the tax was
introduced. The beverage industry said the study was flawed.
Tax proponents say sugary drinks contribute to obesity, diabetes
and tooth decay and that the tax receipts can be directed to health
programs or budget shortfalls. Beverage companies say their
products are being singled out unfairly and that the special tax is
regressive and increases grocery bills.
Still, the American Beverage Association, an umbrella group for
makers of nonalcoholic drinks, said after Tuesday's vote it would
continue working to cut calories.
"We respect the decision of voters in these cities. Our energy
remains squarely focused on reducing the sugar consumed from
beverages -- engaging with prominent public health and community
organizations to change behavior," the group said early
Wednesday.
Both sides spent heavily in California, blanketing the Bay Area
with television ads. Pro-tax supporters spent more than $20 million
on campaigns, with most of the money coming from Michael Bloomberg,
who tried unsuccessfully to impose portion limits on sugary drinks
as mayor of New York City. The antitax campaign, backed by
retailers and funded by the beverage industry, spent at least $30
million.
In San Francisco, residents voted 62% to 38% in favor of the
tax. A city plan to slap a health warning on outdoor advertisements
for sugar-added drinks was put on hold by a federal court in June
after beverage companies argued it violated their free-speech
rights.
Residents in neighboring Oakland voted 61% to 39% in favor of
the tax. In the small nearby municipality of Albany, the vote was
71% to 29%.
The result was closer in Boulder CO, where residents voted 54%
to 46% in favor of a higher tax of two cents per ounce.
Each of those communities pales in size when compared with Cook
County in Illinois, where County Board President Toni Preckwinkle
has proposed a penny-per-ounce tax as part of next year's budget to
help balance the books.
The county's finance committee is scheduled to debate the
special tax Thursday, followed by a meeting of the board of
commissioners and a potential vote the same day. The measure would
require final approval as part of a 2017 budget vote scheduled for
next week.
Ms. Preckwinkle believes she has enough support on the 17-member
board to approve the tax measure, according to a spokesman. The
county estimates the tax, which would go into effect July 1, would
raise $74 million in the first six months.
There are no signs that Congress is considering a federal tax on
sugary drinks and recent attempts by lawmakers in some states to
introduce statewide taxes have failed. But health authorities
increasingly are urging consumers to scale back.
The Food and Drug Administration recommends that Americans limit
their daily intake of added sugars to about 12 teaspoons or 200
calories -- less than in a 20-ounce bottle of regular Coke or
Pepsi. By 2018, U.S. nutrition panels on food and beverage
packaging must list how many grams of caloric sweeteners
manufacturers added and the daily recommended maximum.
Beverage companies say they are taking steps in response to
health concerns, including introducing smaller cans and bottles and
promoting more zero- and mid-calorie sodas. Coke, PepsiCo and Dr
Pepper pledged in 2014 to cut beverage calories in the American
diet by 20% by 2025.
(END) Dow Jones Newswires
November 09, 2016 08:57 ET (13:57 GMT)
Copyright (c) 2016 Dow Jones & Company, Inc.