The tax will add one cent for every ounce of sugary soda
After soda taxes in two California cities failed to pass last November, a soda tax could go straight through to the state.
KTLA reports that a new soda tax proposition already passed the first hurdle Wednesday (clearing a tax committee) and is now making its way through the state Senate.
If passed into law, the bill SB-622 will add an additional $0.01 tax per ounce to any sweet beverage with more than 25 calories, SFist reports. Sugar-free Red Bulls and Diet Cokes won't count, but Vitaminwater, sports drinks, and we imagine those intense Frappuccinos would all be subject to an additional $0.08 or so.
On the bright side, those extra pennies will all go toward the new Children's Health Promotion Fund, which distributes the money to state and community obesity prevention programs, plus public health programs in California schools.
And while 76 percent of El Monte, Calif., voters and 67 percent of Richmond, Calif., voted against the soda tax in city elections last November, a recent field poll found that 68 percent of California voters would vote in favor of the soda tax, given that the money paid for nutritional and physical education programs.
Editorial: Soda tax will improve Californians’ health and cut costs
California lawmakers need to end their unhealthy relationship with Big Soda.
While the soda industry pours millions into legislators’ campaigns every year, state taxpayers pay billions in obesity-related health care costs because of sugary beverage consumption.
Big Soda was at it again Tuesday, forcing legislators to shelve two bills aimed at reducing Californians’ soda consumption. But Assemblyman Richard Bloom’s soda tax proposal, AB 138, passed the Assembly Health Committee by an 8-5 vote. The bill would add a fee of 2 cents per fluid ounce, or 24 cents for a 12-ounce can, of soda. The tax would raise an estimated $2 billion a year for health care programs. The Legislature should stand up to Big Soda and pass the tax on sugary drinks, and Gov. Gavin Newsom should sign it into law.
The soda industry argues that soda taxes are regressive and put an unfair burden on working families and neighborhood stores. That would be a winning argument if the devastating impact of consuming sugary drinks wasn’t so compelling.
The link between drinking sweetened beverages and obesity, diabetes and heart disease is overwhelming. The American Heart Association reports that adults who consume one soda or more daily are 27 percent more likely to be overweight or obese, regardless of their economic status, race or ethnicity.
The cost of treating diabetes-related medical problems is astronomical. The American Diabetes Association says that people with diabetes have medical expenses approximately 2.3 times higher than those without. It estimates the total medical expenses for Californians with diabetes at more than $20 billion a year.
Those costs will only increase given the state’s upward trend of childhood obesity. About 60 percent of California children ages 12-17 drink soda on a daily basis, and 40 percent of those same youth are overweight or obese.
It’s appalling that California lawmakers know these numbers but fail to stand up to the soda industry.
Big Soda won’t be easy to beat this year. This is an industry that last summer leveraged California’s initiative rules to win legislation banning more cities from taxing soda pop. Four California cities — Albany, Berkeley, Oakland and San Francisco — had already passed soda taxes.
Fearing that more cities would follow the example, the industry spent $7 million collecting signatures for an initiative that would have made more local taxes subject to two-thirds voter approval, rather than a simple majority. The scheme scared local and state lawmakers into forging a deal: The soda industry withdrew the initiative and the state placed a moratorium on new local soda taxes until 2031.
Similar pressure forced Assemblyman David Chiu, D-San Francisco, on Tuesday to abandon his effort to ban “Big Gulp” drinks in California. The measure would have outlawed stores and restaurants from selling unsealed sugary drinks in cups larger than 16 ounces. Lobbying also forced Assemblywoman Buffy Wicks, D-Oakland, to withdraw her bill banning the display of sugary drinks near the checkout counters of supermarkets and other stores.
Fortunately, the soda tax bill thus far has survived. The connection between California’s growing health care costs and the consumption of soda is undeniable. A soda tax isn’t ideal, but it’s clearly in the best interests of Californians’ health. And their pocketbooks.
Big Soda Pours Big Bucks Into California’s Capitol(EyeEm/Getty Images)
Insight provides an in-depth look at health care issues in and affecting California.
Dinners at an expensive restaurant in Maui — with ocean views. Tickets to professional sports games. A free screening of “Black Panther” at a Sacramento IMAX theater. And a $250,000 donation to a group that funds the governor’s travel.
That’s just a sampling of the $11.8 million that soft drink companies and their lobbyists spent at the state and local levels in the past two years in California to block proposals such as taxing sugary beverages and slapping health warnings on their drinks, a California Healthline analysis found.
“They exercise extraordinary influence in this building,” state Sen. Bill Monning (D-Carmel) said of the industry. “We don’t underestimate the power of the opposition.”
Monning doesn’t accept soda industry money — and has tried repeatedly to tax sugary beverages in California and place warning labels on packaging. He was one of the most vocal critics last year when the industry blocked cities and counties from levying soda taxes — a maneuver some lawmakers described as “extortion.”
Angered by the industry’s tactics, Monning and other lawmakers now are pushing a package of bills to clamp down on drinks they say contribute to rising rates of obesity and diabetes. Several of the measures are scheduled for a committee hearing Tuesday, including one that would tax distributors of sugary drinks at 2 cents an ounce.
Connecticut, Massachusetts, New York, Rhode Island and Vermont also are considering statewide taxes on sugar-sweetened beverages. At least four states, including Arkansas and West Virginia, already impose taxes on sodas, either by the fluid ounce or on gross receipts, according to the National Conference of State Legislatures.
California Sen. Bill Monning (D-Carmel) displays the amount of sugar in a 20-ounce bottle of Coca-Cola. Monning is pushing legislation that would put health warning labels on sugary drinks. He describes the soda industry as a big influencer in California politics. (Samantha Young/California Healthline)
Although it’s anybody’s guess how much the industry will spend to sway California lawmakers this year, its previous largesse indicates money will flow to nearly every Capitol officeholder.
A California Healthline analysis found that 9 in 10 state senators and members of the Assembly, or a member of their staff, accepted a campaign contribution, gift or charitable donation in 2017 and 2018 from the American Beverage Association (or its political action committee), the Coca-Cola Co. or PepsiCo — the three largest givers in the industry.
The beverage industry, like other interest groups, spends money to influence lawmakers in several ways: It makes financial contributions to their campaigns and lobbies them and their staffs, sometimes plying them with meals, events and travel. It also donates to charities in lawmakers’ names.
“They follow the playbook of the tobacco industry in protecting their products from criticism, casting doubt on the science, lobbying, working behind the scenes, funding front groups, doing all the things that industries that make potential harmful products do,” said Marion Nestle, author of “Soda Politics” and a professor emerita of food nutrition at New York University.
The beverage association and Coca-Coca did not respond to specific questions about their political giving, and PepsiCo didn’t respond at all. William Dermody Jr., an ABA vice president, argued “excessive” taxes on drinks would harm the economy.
“It’s important to inform lawmakers about the contributions that our products make to the local economy, not only the millions in tax revenues we generate for the state but the wages we bolster for hundreds of thousands of California workers,” Dermody said in an email.
Big Soda is not alone in trying to influence lawmakers on the issue of sugary drinks.
The California Medical Association and the California Dental Association, which represent doctors and dentists, are planning a ballot initiative to tax sugary drinks. Together they spent about $10.6 million in lobbying and campaign contributions to influence a broad range of health-related legislation over the past two years.
For the soda industry, 2017-18 was particularly expensive.
Why? As more California cities passed and proposed local taxes on sugary beverages, soda companies last year poured $8.9 million into a statewide ballot measure that would have made it more difficult for cities to levy any new tax, not just those on beverages. The money came from the American Beverage Association PAC, primarily funded by Coca-Cola, Pepsi and Dr Pepper Snapple Group.
Concerned that California voters would approve a higher voting threshold for all local taxes, lawmakers reluctantly banned local soda taxes until Jan. 1, 2031, if the industry dropped its ballot proposal.
“I don’t think they won any friends in the legislature,” said Assemblywoman Lorena Gonzalez (D-San Diego). She received $11,000 in campaign contributions from the industry in the past two years, and has voted on its side against bills to label and tax sugary drinks, citing concerns that a soda tax is regressive and would harm poor, minority communities.
Entertaining Lawmakers And Their Staffs
In 2017 and 2018, the American Beverage Association spent just over $1 million lobbying California policymakers, while PepsiCo spent $371,482 and Coca-Cola spent $352,469, according to forms filed with the California Secretary of State’s office. That’s nearly 70 percent more than they spent in the previous two years.
The bulk of the money went to lobbying firms staffed by former government employees — people with connections at the Capitol who know how to influence legislation.
The ABA spent $379 on food for eight lawmakers in November 2017 as part of an $813 dinner tab at the upscale Humble Market Kitchin Restaurant in Maui — where a steak might go for $65 and a whole fried fish for $57. The legislators were attending a legislative retreat.
The association gave 11 legislative staffers tickets to Sacramento Kings basketball games and paid for their food and drinks, at a cost ranging from $163 to $326 per staffer. It also shelled out at least $3,747 for at least 92 lawmakers, staff members and their guests to attend a showing of “Black Panther” in March 2018.
Asked why Assemblywoman Sabrina Cervantes (D-Riverside) attended the movie, her spokeswoman said she is “supportive of the arts and celebrates diversity in cinema.”
The ABA’s biggest lobbying expense was a $250,000 payment to the California State Protocol Foundation, which funded Jerry Brown’s travel while he was governor.
In The Name Of Charity
While there are limits on how much lawmakers can accept in gifts, companies also seek to gain influence by making unlimited charitable donations on a lawmaker’s behalf. These donations are known as “behested payments,” and the industry made nearly $100,000 of them in 2017 and 2018.
State Assemblywoman Lorena Gonzalez (D-San Diego) is skeptical of soda taxes and their impact on low-income and minority communities. But she says the soda industry didn’t win any friends last year when it maneuvered a vote to ban local soda taxes. (Samantha Young/California Healthline)
Last year, a Coca-Cola distributor in Gonzalez’s district donated $10,000 to the San Diego Food Bank in her name — a contribution she said she was unaware of until contacted for this article.
Sometimes, lawmakers seek out contributions. When state Assemblyman Adam Gray (D-Merced) asked the beverage association to sponsor the annual meeting of the National Conference of State Legislatures, the association gave $25,000 in his name. Gray, who served as California’s representative to the meeting, said it was his responsibility to secure sponsors, and that he asked several corporations to contribute.
Those contributions, he said, don’t influence his vote. For example, he said Google gave $100,000 but he voted for privacy legislation the company opposed.
“If you want to support my agenda, my voting record and the things I stand for, I’m happy to take that support,” Gray said. “But it has zero role in how I represent my district or how I make decisions on public policy.”
Funding Lawmakers’ Campaigns
The most direct method that interest groups use to influence the political process is by giving money to campaigns, political parties and legislative caucuses.
Along with spending $8.9 million on the statewide ballot measure, the American Beverage Association PAC, PepsiCo and Coca-Cola gave about $1.1 million to other statewide and local political efforts in the past two years.
The majority of legislators received campaign cash from the beverage association, Coke or Pepsi — if not all three.
A spokesman for Coca-Cola said the company selects recipients based on committee assignments, caucus memberships, leadership positions and whether they represent regions with Coca-Cola facilities.
“There is no one-size-fits-all approach,” said company spokesman Max Davis. “At times, the individual views of candidates we support may vary from our own.”
Monning said the soft drink industry is a formidable adversary. Many colleagues tell him they can’t vote for legislation that would cut sales because they have a distributor in their district.
In addition to a statewide soda tax, the bills under consideration this year would require warning labels about sugar and prevent soda companies from offering retailers incentives to sell their drinks. They also would ban retailers from selling supersize sodas and prohibit sales in checkout lanes.
As lawmakers consider these bills, Monning said, his question to his colleagues will be simple:
“Do you represent the soda industry?” he said. “Or do you represent those children in your district showing a steady increase in poor health?”
California Healthline digital reporter Harriet Blair Rowan contributed to this report.
How California Healthline compiled data about soda companies’ political spending
Among the ways soda companies try to exert influence on the political process is by contributing money to campaigns hiring lobbyists and plying elected officials with drinks, meals and event tickets and making charitable contributions on the behalf of lawmakers.
Using the California secretary of state’s website, California Healthline downloaded the campaign contributions made by the American Beverage Association PAC, Coca-Cola Co., PepsiCo and Dr Pepper Snapple Group in 2017-18. This includes some non-monetary contributions.
To track lobbying, we created a spreadsheet of expenses reported on lobbying disclosure forms, also available on the secretary of state’s website, by the American Beverage Association, Coca-Cola and Pepsi. We found details about how much the industry paid lobbying firms and which lawmakers, or members of their staff, accepted gifts.
To find how much these entities gave in charitable contributions, California Healthline pulled data described as “behested payments” from the California Fair Political Practices Commission website. These are payments special interests can make to a charity or organization on behalf of a lawmaker. Sometimes, a few of these payments also show up on lobbying forms. We compared the behested payments with the lobbying reports to ensure we did not double-count money.
Tax junk food: Fight obesity one penny at a time
A California lawmaker is targeting the obesity epidemic with a tax that would slap a penny-an-ounce levy on drinks sweetened with sugar or corn syrup.
The food industry, not surprisingly, has squared off against the idea, arguing that the tax bill is a punitive assault on personal choice.
“The government doesn’t have the right to social engineer,” said J. Justin Wilson, senior research analyst at the industry-backed Center for Consumer Freedom. “It doesn’t have a right to protect us from ourselves.”
No? The food folk are correct that this is a way of punishing people for unhealthy behavior. But they’re wrong when they say the government has no role to play in prodding people to do better.
The other prominent sin taxes out there, for tobacco and alcohol, raise money for health and education programs, and that’s a good thing. But their main purpose is to make these products more expensive and thus less attractive to potential users.
Considering that about two-thirds of American adults and a third of our kids are now overweight or obese, it seems more than reasonable to extend the same thinking to sugary drinks, which researchers say are a key contributor to the obesity epidemic.
That said, soda isn’t the sole culprit. If we’re serious about shedding all those excess pounds, it’ll take more than just making Coke and Pepsi more expensive. More on that in a moment.
First, let’s take a closer look at AB 669, the legislation introduced last week by Assemblyman William Monning (D-Carmel). He serves as chairman of the Assembly Health Committee.
The bill would levy an excise tax of 1 cent per ounce on any beverage with caloric sweeteners such as sugar and high-fructose corn syrup. These beverages include sodas, energy drinks and sports drinks.
The estimated $1.7 billion raised by the tax annually would be dedicated exclusively to funding physical fitness and childhood obesity programs statewide that are now facing cuts because of California’s ongoing budget woes.
The money would go toward activities and gear at schools and nonprofit organizations intended to get kids off their keisters — sports, games, play equipment. It would go toward providing more-healthful lunch choices and efforts to educate kids about eating right.
That won’t do the whole job, of course. Parents also have some heavy lifting to do by making smarter choices at the grocery store and drive-through window. But it’s better than doing nothing as kids scarf junk food and plop in front of the TV.
“These beverages have zero nutritional value, and the advertising that targets children is massive,” Monning told me.
He rejected the food industry’s claim that government has no role to play in influencing people’s behavior.
“What we’re trying to respond to is the social engineering that corporate advertising does every day,” Monning said. “That’s the real social engineering.”
He said the impact of beverage marketing is most profound in lower-income and minority communities, where studies show that soda is frequently consumed on a daily basis and as a routine part of meals.
One recent study found that adult obesity rates for blacks and Latinos is higher than for whites in nearly every state.
The adult obesity rate for blacks is at least 30% in 43 states and the District of Columbia, according to the Trust for America’s Health and the Robert Wood Johnson Foundation. The adult obesity rate for Latinos is at least 30% in 19 states. Only one state, West Virginia, has an adult obesity rate for whites greater than 30%.
“This is a public health response to a public health epidemic,” Monning said of his bill.
Wilson of the Center for Consumer Freedom, which is funded primarily by the food industry, countered that people have a right to drink unhealthful beverages if that’s their choice. “Soda is not a problem,” he said. “It’s a simple pleasure.”
The real problem, Wilson said, is “overconsumption of calories,” and soda accounts for less than 10% of the average person’s daily calorie intake.
That may be true, responded Harold Goldstein, executive director of the California Center for Public Health Advocacy, but the calories from soda constitute a significant portion of the extra, unneeded amount that makes people fat.
A 2009 report by UC Berkeley’s Center for Weight and Health found that from the 1970s to 2000, the average person’s daily food consumption increased by 300 calories. Of that amount, “the increase in calorie consumption from sweetened beverages is equivalent to 43% of the total increase in calorie consumption,” the report found.
“It’s the equivalent of drinking a piece of chocolate cake any time you’re thirsty,” Goldstein said.
So making soda more expensive, and devoting the additional revenue to anti-obesity efforts, makes a lot of sense both socially and economically — just as we’ve seen for tobacco and alcohol. But it’s not the whole answer.
The food industry and health advocates agree that what’s needed is significant change in people’s behavior. Put simply, we need to eat less and exercise more.
Personal responsibility is important. But if that alone were sufficient to keep us fit and trim, we wouldn’t be a nation of porkers and porkers-in-waiting.
That’s why I’d take Monning’s soda tax and expand it to fast food — say, a penny for every 500 calories served.
A 540-calorie Big Mac at McDonald’s would net an extra penny. So would a 500-calorie large order of fries. A 32-ounce chocolate Triple Thick Shake, at 1,160 calories, would bring in two cents.
Factor in all the other stuff bought every day at all fast-food chains, and you can see we’d be talking about some serious money. That money in turn would be used for creation of bike paths, basketball courts and other fitness-related resources.
It could also be used to help subsidize gym memberships (which health insurers should do as well, if they really want to cut their long-term costs).
The food industry is right: A soda tax won’t solve the obesity epidemic. Sin taxes in general aren’t going to make problems go away.
As California Weighs Soda Warning Labels, Tax In Berkeley Shown To Dilute SalesElizabeth Bautista, a health educator at Oakland’s La Clinica health center, holds a sign showing how much sugar goes into sweetened beverages. (Ana B. Ibarra/California Healthline)
A new study of the soda tax in Berkeley, Calif., shows that residents are doing what public health experts had hoped — they’re ditching sugary drinks and opting for healthier beverages.
The study, the largest to date of Berkeley’s soda tax, comes as California lawmakers this week again consider legislation to put a warning label on sweetened beverages — a bill that died in committee three times in three years.
The study, published Tuesday in the journal PLOS Medicine, shows that a year after Berkeley’s soda tax took effect in 2015, the city saw a nearly 10 percent drop in purchases of sugary drinks and a nearly 16 percent increase in sales of bottled water.
The study looked at 15.5 million supermarket checkouts in the city, evaluated prices in 26 stores and surveyed 957 adult residents by phone.
Dr. Lynn Silver, the lead author of the study and a senior adviser with the Public Health Institute in Oakland, Calif., said that researchers were pleasantly surprised to see the significant increase in the sale of water.
Silver said that before voters passed the 1-cent-per-fluid-ounce tax in 2014, researchers were not sure if the small additional cost to buy soda would be enough to make a difference in a prosperous city like Berkeley. But the study’s findings show that it’s “been a home run,” she said.
However, while purchases of sugary drinks dropped in Berkeley, they rose in surrounding Bay Area cities by 6 percent — prompting the question of whether residents simply shifted their soda buying to other cities without a soda tax. Silver said that residents surveyed did not report significant changes in where they purchased their beverages after the tax took effect.
The study, Silver said, also showed that overall beverage sales went up in Berkeley. If people were buying beverages elsewhere, that overall number would have most likely dropped, she explained.
Last year, voters approved a similar soda tax in San Francisco, Oakland and Albany, Calif., as well as in Boulder, Colo., Cook County, Ill., and Philadelphia. Santa Fe, N.M., and Seattle are considering soda taxes.
Researchers believe soda taxes in those communities could have a greater impact than in Berkeley because per capita consumption of sweetened beverages is about three times lower in Berkeley than the country as a whole, Silver said.
Meanwhile, in the California Legislature, a bill reintroduced by Sen. Bill Monning (D-Carmel) would require that sugar-sweetened drinks of 75 calories or more per 12 ounces be labeled with the following message:
STATE OF CALIFORNIA SAFETY WARNING: Drinking beverages with added sugar(s) contributes to obesity, type 2 diabetes, and tooth decay.
“Consumers have the right to know about these potential harmful health impacts, and [this bill] will empower Californians to make healthy beverage choices,” Monning said in a press statement.
The bill also would require owners of vending machines selling sugary drinks to place a safety warning on the machines’ exteriors.
A spokeswoman for the American Beverage Association, an industry group, said in an emailed statement that consumers have more information than ever before to make informed food and beverage choices.
“Singling out one common grocery item for a misleading warning label will do nothing for real public health challenges like obesity and diabetes, which have multiple risk factors,” the spokeswoman wrote.
If the bill passes, labeling would be required starting July 1, 2018. The legislation is scheduled for a hearing on Wednesday in the Senate Health Committee.
This story was produced by Kaiser Health News, which publishes California Healthline, an editorially independent service of the California Health Care Foundation.
AIMED AT EDUCATION
Supporters of the legislation introduced on Thursday said the warning labels would merely provide consumers with information they should have to make healthy, informed choices.
“My own husband had to watch his father have, first his foot and then his leg amputated from diabetes,” said Darcel Lee, a physician who is executive director of the California Black Health Network, which supports the bill along with the California Medical Association, the California Center for Public Health Advocacy and other groups.
Under the bill, all beverage containers with added sweeteners that have 75 calories or more per 12 ounces would be required to carry a label that reads: State of California Safety Warning: Drinking beverages with added sugar(s) contributes to obesity, diabetes and tooth decay.”
The label text was developed by a national panel of nutrition and public health experts.
Supporters said the requirement would effectively apply to any sugar-sweetened sodas, energy drinks, sports drinks, vitamin water and iced teas, all of which he said have been marketed more aggressively by beverage makers in recent years.
U.S. soda consumption rose sharply in recent decades, even as the health risks of sugary drinks became better understood.
Drinking just one soda a day increases an adult’s likelihood of being overweight by 27 percent and a child’s by 55 percent, while a soda or two a day increases the risk of diabetes by 26 percent, studies show.
Unless current trends are reversed, health advocates say, one in three U.S. children born after the year 2000, and nearly half of Latino and African-American children, will develop type-2 diabetes in their lifetimes.
Other health risks linked with obesity include heart disease, cancer and asthma.
By the sheer magnitude of California’s economy, requiring safety labels on sodas sold there would likely influence other states or the federal government to follow suit.
Obesity accounts for nearly $200 billion a year in U.S. medical spending, more than 20 percent of national healthcare costs, according to a 2012 report in the Journal of Health Economics. It also is linked to lower worker productivity and diminished quality of life.
Reporting by Sharon Bernstein Additional reporting by Steve Gorman and Lisa Baertlein Editing by Sophie Hares and Andre Grenon
Now: the campaign against sodas and sugary drinks in the name of public health, the most prominent example of late, New York City mayor Michael Bloomberg proposed banning the sale of sweetened drinks larger than 16 ounces at many venues. And, today, health officials and researchers from around the country are meeting here in Washington, D.C., to compare strategies.
One city in California may be poised to go farther than anyone has so far, with a new tax.
NewsHour correspondent Spencer Michels reports.
At the family market in the working-class town of Richmond, Calif., near San Francisco, owner Mohammed Elzofri is deeply concerned about a new City Council-backed measure which would place a penny-per-ounce tax on sugar-sweetened beverages.
The controversial plan designed to cut consumption of sugar goes before voters in November. Elzofri says about 80 percent of his customers buy some kind of sugary drink and the tax, he says, would add about 68 cents to a popular two-liter drink.
MOHAMMED ELZOFRI, store owner: This will just hurt the poor people and hurt these business owners like myself. People that want to drink sodas, they drink. Palm Springs, and Beverly Hills, they all drink sodas. I mean, it's not a matter of just Richmond that got that. I mean, everybody everywhere is going to you know, gain some weight.
In fact, the rising rates of diabetes and other weight-related illnesses are at the heart of the debate now raging in Richmond over the proposed tax.
DR. JEFF RITTERMAN, Richmond, Calif., city council: We have a big problem with childhood obesity in Richmond, as you probably know. And it's a health disparity issue for us. Fully a third of our Latino fifth- and seventh-graders and a third of our African-American fifth- and seventh-graders are obese.
City Councilman Jeff Ritterman, a cardiologist, proposed the tax, which would be the first of its kind in the country. He wants people to reduce their consumption of sodas, what he calls the biggest culprit of the obesity epidemic.
DR. JEFF RITTERMAN:
If you look at where most of our added sugar is coming, it's coming from the sugar-sweetened beverages. And they're different from solid foods. Solid foods produce satiety. You get full. You get full when you eat a piece of cake. You don't get full when you drink the soda, even though they have the same amount of calories.
It's actually a poison for you, because your liver can't handle that huge amount of fructose.
Ritterman says money from the tax, which exempts diet drinks and fruit juices, would raise an estimated $3 million for local sports fields, diabetes treatment for low-income children, and school-based nutrition classes.
That's what Richmond needs, says Doria Robinson, a third-generation Richmond resident who runs a program that supports school and community gardens.
DORIA ROBINSON, community activist: Richmond isn't so much a food desert. It's actually a cornucopia of junk food. It basically translates into pretty much everyone knowing somebody with diabetes, whether they're a child or an adult, and really struggling with it.
The tax, she says, could break the addiction to soda so common in Richmond.
At least half the kids start their day with a Coke and a pack of hot fries. Like, that's breakfast, and then throughout the day drinking soda like it's water. Those empty calories have an enormous cumulative effect on our society. We are paying the price in the medical bills and all of the kind of health outcomes in the community.
Richmond is the latest in a recent string of cities and states considering special taxes on sugary beverages. So far, all have been defeated.
City Councilman Corky Booze, a former auto racer, took us for a drive around his community to show why he opposes the tax.
CORKY BOOZE, Richmond, Calif., city council: Richmond is a real diverse city. I would say it's a working, low, economically suppressed community. Most of the people don't have cars. Kids can't get out of here. The kids are basically stuck purchasing from this corner store. And the tax is definitely going to affect them.
Booze says some residents will shop elsewhere to avoid the tax, but poor people won't be able to.
It's unfair to people who basically don't have the means of getting out of their neighborhood store to go into the neighboring communities to be able to avoid that tax.
If we were going to spend our time worrying about something within the city of Richmond that we can fix, we should be working on our streets and we should be working on our job situation.
And Booze says he doesn't think the government should be in the business of dictating what people should drink or eat.
I think that when we get into the point of being a dictator to people, I think it's wrong. People are heavy for all kinds of reasons. It could be health. It could be the style of food that they eat at home. I just don't think the sodas are going to change that.
That's also the position of the American Beverage Association, the industry trade group representing companies like Coke, Pepsi, Red Bull, and Gatorade. It has lobbied hard against similar efforts around the country.
An affiliate group, Americans Against Food Taxes, ran this TV spot during the Super Bowl last year.
They want to put new taxes on a lot of groceries I buy, like soft drinks, juice drinks, sports drinks, even flavored waters. Give me a break. I can decide what to buy without government help.
In a statement provided to the NewsHour, the Beverage Association called the proposed Richmond tax regressive, and added: "It disproportionately hurts the most those who can least afford it. People don't support soda taxes, don't believe they will reduce obesity, and don't trust these taxes will go to pay for childhood obesity programs. They see these new taxes for what they are, a money grab to help pay for more government."
But for many in the medical community, sugary beverages are a health issue.
Dr. Kirsten Bibbins-Domingo, an internist at the University of California, San Francisco, co-authored a recent study which found a nationwide penny-per-ounce soda tax would reduce consumption by 15 percent and would, over a 10-year period, prevent several million diabetes cases and nearly 100,000 heart disease cases, as well as saving $17 billion in medical costs.
Dr. Bibbins-Domingo says similar taxes on cigarettes have had a dramatic affect on public health.
DR. KIRSTEN BIBBINS-DOMINGO, University of California, San Francisco: It was a few decades ago when we had high rates of tobacco and we had high rates of tobacco-related illnesses. Those measures really turned the tide and really led to lower rates of tobacco across the country.
I think the same has the potential to happen in this case. Richmond in isolation is unlikely to achieve a big effect, and Richmond has taken bold measures to really be at the forefront of this. But many other &mdash many other communities are talking about this very issue.
The campaign to oppose Richmond's soda tax is already under way. A local group with encouragement from the American Beverage Association and the local Teamsters union is going door to door to fight the tax.
For his part, Councilman Ritterman says he'd prefer to have a national or even a state tax passed. But, for now, he's trying to encourage Bay Area governments, including Oakland, Berkeley, and San Francisco, to join him in the fight against sugary beverages.
In Europe, the French are already paying higher taxes on Cokes and Pepsis, and the Danes are paying a tax on butter. You can find that on our website.
And our next broadcast report looks at American junk food as the source of tooth decay among children in El Salvador.
Sugary beverages are the leading source of added sugar consumption in America according to the CDC, and consuming sugar in excess can lead to obesity, chronic diseases, and tooth decay, among other issues. Though the bill does not specify the amount of the tax, the Chronicle reported that previous proposals of a similar bill had advocated taxing two cents per fluid ounce. This would override the current ban by being a statewide, versus a citywide tax.
Berkeley was the first US city to tax soda, and saw a 10 percent decrease in consumption in the first year. Three other cities in California also have a soda tax, and were protected from last year’s ban on local soda taxes because the taxes had already been instituted.
Cities in other states have also enacted soda taxes, and a study of Philadelphia’s efforts in particular, found a 40 percent decrease in soda consumption in the first two months. While soda taxes only span eight cities in the US, others may follow suit if California finds success with one or more of these bills.
Regulation 1602.5. Reporting Methods for Grocers.
Reference: Sections 6359 and 6373, Revenue and Taxation Code.
(a) Food Products Exemption—In General. Tax does not apply to sales of food products for human consumption. Accurate and complete records of all purchases and sales of tangible personal property must be kept to verify all exemptions claimed as sales of exempt food products.
In preparing returns, grocers may use any method of determining the amount of their sales of exempt food products which does not result in an overstatement of the exemption. Grocers must be prepared to demonstrate by records which can be verified by audit that the method used properly reflects their sales of exempt food products.
(1) Purchase-ratio Method. One method which may be used is the purchase-ratio method sometimes referred to as the "grocer's formula". Under this method, grocers may claim as sales of exempt food products that proportion of their total gross receipts from the sale of "grocery items" that the amount of their purchases of exempt food products bears to their total purchases of grocery items.
If the grocer elects to use the purchase-ratio method of reporting, the following criteria should be followed:
(A) The purchase-ratio method may be used only by grocers and only with respect to sales of "grocery items".
(B) Grocers selling clothes, furniture, hardware, farm implements, distilled spirits, drug sundries, cosmetics, body deodorants, sporting goods, auto parts, cameras, electrical supplies, appliances, books, pottery, dishes, film, flower and garden seeds, nursery stock, fertilizers, flowers, fuel and lubricants, glassware, stationery supplies, pet supplies (other than pet food), school supplies, silverware, sun glasses, toys and other similar property should not include the purchases and sales of such items in the purchase-ratio method. These items are referred to as "nongrocery taxable" items.
When the purchase-ratio method is used for reporting purchases and sales of nongrocery taxable items are computed by the retail extension or markup method, the computation of nongrocery taxable sales should include adjustments for beginning and ending inventories of these items and may include adjustments for shrinkage as specified in (d) below.
(C) Grocers selling gasoline, feed for farm animals, farm fertilizers or who operate a snack bar or restaurant, or sell hot prepared food should not include the purchases and sales of such items or operations in the purchase-ratio method.
(D) The purchases and sales of meat, fruit, produce, delicatessen (except hot prepared food or food sold for immediate consumption at facilities provided by the grocer), beverage (except distilled spirits in the liquor department) and bakery departments must be included in the purchase-ratio method if these departments are operated by the grocer.
(E) The records should be complete and adequate and all sales and purchases should be properly accounted for in the records. All purchases of exempt food products, grocery taxable items and nongrocery taxable items should be segregated into their respective classifications.
(F) The following definitions apply to the purchase-ratio method:
1. "Exempt food products" means those items generally described as food products in Section 6359 and Regulation 1602. If grocers are uncertain as to the classification of any product, they should contact the nearest board office.
2. "Total gross receipts from the sale of grocery items" means the total amount of the sales price of all exempt food products and taxable grocery items, including sales tax reimbursement, amounts receivable from manufacturers, or others, for coupons (excluding any handling allowances) redeemed by customers, and the face value of federal food stamps. The term does not include receipts from sales of those items described in (b)(1)(B), above, which are commonly referred to as "nongrocery taxable items", or from those sales described in (b)(1)(C), above (gasoline, snack bar, etc.). It does not include amounts which represent "deposits", as defined in Regulation 1589, e.g., bottle deposits. When deposits are not segregated, it will be presumed, in the absence of evidence to the contrary, that the total deposits received are equal to the deposits refunded.
3. "Grocery items" means exempt food products and taxable items other than those generally classified under (b)(1)(B) and (b)(1)(C), above.
4. "Purchases" means the actual amount which a grocer is required to pay to the suppliers of merchandise, net of any cash discounts, volume rebates or quantity discounts and promotional allowances. The term does not include the cost of transportation, processing, manufacturing, warehousing, and other costs, if these operations are self-performed. It does not include the cost of operating supplies such as wrapping materials, paper bags, string, or similar items. It does not include amounts which represent "deposits", as defined in Regulation 1589, e.g., bottle deposits (see (b)(1)(F)2., above). If deposits are not segregated, it will be presumed, in the absence of evidence to the contrary, that the amount deposited with the supplier is equal to the credit received for bottles returned by the grocer.
A. As used herein, the term "cash discount" means a reduction from the invoice price which is allowed the grocer for prompt payment.
B. As used herein, the term "volume rebate or quantity discount" means an allowance or reduction of the price for volume purchases based on the number of units purchased or sold. Such rebates or discounts normally are obtained without any specific contractual obligation upon the part of the grocer to advertise or otherwise promote sales of the products purchased. The term does not include patronage dividends distributed to members by nonprofit cooperatives pursuant to Section 12805 of the Corporations Code, or rebates which constitute a distribution of profits to members or stockholders.
C. As used herein, the term "promotional allowance" means an allowance in the nature of a reduction of the price to the grocer, based on the number of units sold or purchased during a promotional period. The allowance is directly related to units sold or purchased although some additional promotional expense may be incurred by the grocer. Normally, grocers would feature the product in their advertising, although they may or may not be contractually obligated to do so. The retail price of the product may or may not be lowered during a promotional period.
The term does not include display or other merchandising plan allowances or payments which are based on agreements to provide shelf space for a price not related to volume of purchases, or cooperative advertising allowances which are based on a national line rate for advertising and are not directly related to volume of purchases and sales. Cooperative advertising allowances are intended to reimburse grocers for a portion of their advertising costs for a particular product or products.
(G) Sales tax reimbursement collected in accordance with Regulation 1700 which is included in total sales is an allowable deduction. An example of the computation of the purchase-ratio method which provides for an adjustment for sales tax included follows:
1. Taxable grocery purchases
2. Add sales tax adjustment (8.25%* × Item 1)
3. Adjusted taxable grocery purchases (Item 1 + Item 2)
4. Exempt food products purchases
5. Total grocery purchases including sales tax (Item 3 + Item 4)
6. Exempt food products ratio (Item 4 divided by Item 5)
7. Total sales including sales tax
8. Nongrocery taxable sales including sales tax (if such sales are not accurately segregated, mark up nongrocery taxable cost of goods sold
to compute sales—add 8.25% * sales tax to total)**
9. Grocery sales including sales tax (Item 7 – Item 8)
10. Exempt food products sales (Item 6 × Item 9)
11. Sales of taxable items including sales tax (Item 7 – Item 10)
12. Less taxable items purchased with food stamps (2% of total
food stamps redeemed for period, e.g., 2% × $100,000)
13. Taxable measure including sales tax (Item 11 – Item 12)
14. Sales tax included (8.25/108.25 × Item 13)
15. Measure of tax (Item 13 – Item 14)
16. Sales tax payable (8.25% * × Item 15)
* Use applicable tax rate—tax rate of 8.25% used for illustration purposes.
** Adjust for shrinkage if applicable—see paragraph (d).
(2) Modified Purchase-Ratio Method. Any grocer who does not follow the procedure outlined in (b)(1), above, but reports on a purchase-ratio basis of some type is using a modified version of the purchase-ratio method. For example, grocers who include self-performed processing, manufacturing, warehousing or transportation costs in the purchase-ratio formula are using a modified version. Grocers using such a modified version must establish that their modified version does not result in an overstatement of their food products exemption. They may demonstrate the adequacy of their modified method by extending taxable purchases, adjusted for inventories, to retail for a representative period or computing taxable sales by marking up taxable purchases, adjusted for inventories, for a representative period. Grocers must retain adequate records which may be verified by audit, documenting the modified purchase-ratio method used.
(3) Retail Inventory Method and Markup Method. Grocers who engage in manufacturing, processing, warehousing or transporting their own products may prefer to use a retail or markup method of reporting. These methods are described below:
(A) Retail Inventory Method.
1. The opening inventory is extended to retail and segregated as to exempt food products and taxable merchandise.
2. As invoices for merchandise are received, they are extended to retail and segregated as to exempt food products and taxable merchandise.
3. The ending inventory at retail is segregated as to exempt food products and taxable merchandise.
4. The total of segregated amounts determined in 1 and 2 less 3 represent anticipated exempt and taxable sales.
5. The segregated amounts determined in 4 are adjusted for net markons, net markdowns, and shrinkage to determine realized exempt and taxable sales.
6. Physical inventories are taken periodically to adjust book inventories.
(B) Cost Plus Markup Method—Taxable Merchandise.
1. The cost of all taxable merchandise is marked up to anticipated selling prices at the time of purchase. Records are kept of net markons, net markdowns, and shrinkage for all taxable merchandise. Such records are used to adjust the anticipated selling price to the realized price. Inventory adjustments are required unless the inventory of taxable merchandise at the beginning and ending of reporting periods is substantially constant. Returns should reflect as taxable sales the realized selling price of all taxable merchandise during a reporting period (anticipated sales price on purchases adjusted for inventory changes and other adjustments of the types mentioned).
2. If the grocer elects to use the cost plus markup method of reporting, the following criteria should be followed:
A. Markup factor percentages*** applicable to taxable merchandise should be determined by a shelf test sample of representative purchases, covering a minimum purchasing cycle of one month within a three-year period, segregated by commodity groupings, i.e., beer, wine, carbonated beverages, tobacco and related products, paper products, pet food, soap, detergents, etc. The markup factor percentages determined for commodity groupings should be applied to the cost of sales of the respective commodities for the reporting period to determine taxable sales.
In order to insure that markup factor percentages typical of the total business are determined, grocers who conduct multistore operations should include purchases from several representative stores in the shelf test sample of markup factor percentages.
*** Markup factor percentage is the markup + 100%. When applied to cost, it computes the selling price. For example, an item costing $1.00 and selling at a 25% markup will have a markup factor of 125%. The markup factor (125%) when applied to $1.00 cost results in a $1.25 selling price.
B. As an alternate procedure to A., above, the overall average markup factor percentage for all taxable commodity groupings may be used to determine taxable sales for the reporting period. This markup factor percentage is applied to the overall cost of taxable sales for the reporting period.
The overall average markup factor percentage should be determined as follows:
a. Determine markup factor percentages by commodity groupings based on shelf tests covering a minimum purchasing cycle of one month within a three-year period.
b. Determine cost of sales, segregated by commodity groupings, for a representative one-year period.
c. Apply markup factor percentages (Step a) to the cost of sales of the respective commodity groupings (Step b) to determine anticipated sales by commodity groupings and in total.
d. Divide total anticipated sales (Step c) by the respective total cost of sales to determine the overall average markup factor percentage.
C. In calculating markup factor percentages, appropriate consideration should be given to markon and markdown price adjustments, quantity price adjustments such as on cigarettes sold by the carton, liquor sold by the case and other selling price adjustments. Quantity and other price adjustments may be determined by a limited test of sales of a representative period or by sales experience of a representative store within the operating entity.
D. The computation of taxable sales for the reporting period should be based on cost of sales for the period. If for any particular reporting period or periods, cost of sales is not determinable because actual physical inventories are unknown and inventories remain substantially constant, the computation of taxable sales may be based on purchases for the period. However, if inventories are not substantially constant, adjustments for physical inventories should be taken into consideration in one of the reporting periods occurring within the accounting year.
E. Shrinkage should be adjusted as specified in (d) below.
F. Taxable markup factor percentages based on shelf test samples will generally be considered valid for reporting purposes for a period of three years, provided business operations remain substantially the same. A substantial change in business operations will be considered as having occurred when there is a significant change in pricing practices, commodities handled, commodity mix, locations operated, sources of supply, or other circumstances affecting the nature of the business.
(4) Electronic Scanning Systems. The use of a scanning system is another acceptable reporting method for grocers. Electronic scanning systems utilize electronic scanners and central computers to automatically compile and record taxable and nontaxable sales, sales tax, and related data from scanning of products imprinted with the Universal Product Code. It is the grocer's responsibility to establish the propriety of reported amounts. Grocers must ensure that proper controls are maintained for monitoring and verifying the accuracy of the scanning results and tax returns. Adequate documentation must be retained which may be verified by audit, including all scanning programs relating to product identity, price, sales tax code, program changes and corrections to the programs. Records which clearly show a segregation of taxable and nontaxable merchandise purchases would provide an additional source from which the scanning accuracy may be monitored or verified.
(c) Food Stamps. Tangible personal property eligible to be purchased with federal food stamps and so purchased is exempt from the tax. Grocers who receive gross receipts in the form of federal food stamp coupons in payment for such tangible personal property which normally is subject to the tax, e.g., nonalcoholic carbonated beverages, may deduct on each sales tax return an amount equal to two percent (2%) of the total amount of food stamps redeemed during the period for which the return is filed. Effective January 1, 1993, grocers may claim amounts in excess of two percent whenever the following computation results in a greater percentage: total purchases of taxable items eligible to be purchased with federal food stamps divided by an amount equal to the total of the exempt food product purchases as defined in subdivision (b)(1)(F)1 plus the purchase of taxable items eligible to be purchased with federal food stamps. For example, for a reporting period, if the total purchases of carbonated beverages equals $5,000 and the total purchases of exempt food products equals $130,000, a percentage of 3.7% ($5,000 ÷ $135,000) may be used in computing the allowable food stamp deduction for that period. This deduction may be taken in lieu of accounting separately for such sales.
(d) Shrinkage. As used herein, the term "shrinkage" means unaccounted for losses due to spoilage, breakage, pilferage, etc. Grocers who incur such losses, may, for reporting purposes, adjust for such losses as follows:
(1) An adjustment of up to 1 percent of the cost of taxable merchandise may be taken into consideration when the retail inventory or markup method is used for reporting purposes.
(2) An adjustment of up to 3 percent of the cost of nongrocery taxable items may be taken into consideration when the purchase-ratio method is used for reporting purposes and sales of nongrocery taxable items are computed by the retail extension or markup method. The adjustment is limited to an overall 1 percent of taxable purchases when other than the purchase-ratio method is used for reporting purposes.
Losses in excess of the above are allowable when supported by records which show that a greater loss is sustained.
(e) List of Methods Not Exhaustive. The methods by which grocers may determine their sales of exempt food products are not limited to the methods described above. Grocers may use any method which they can support as properly reflecting their exempt food sales. As is the case for all exemptions, it is the grocer's responsibility to establish the propriety of the amount of the claimed exemption.
(f) Audits. Taxpayers using one of the approved methods of reporting described in this regulation will normally be audited by application of the same approved procedure in the audit to verify the accuracy of claimed deductions. However, determinations may be imposed or refunds granted if the board, upon audit of the retailer's accounts and records, determines that the returns did not accurately disclose the amount of tax due.
History—Adopted May 10, 1973, effective June 23, 1973. Amended August 24, 1988, effective, November 17, 1988. In subdivision (c) amended to provide that certain items purchased with food stamps coupons are exempt from sales and use taxes.
Amended July 28, 1993, effective October 21, 1993.
Amended subdivision (c) to provide an alternative method which grocers may use to compute the allowance deduction for the total amount of food stamp coupons redeemed during the return period.
Amended February 8, 1995, effective July 19, 1995. Added subparagraph (b)(4) to recognize electronic scanning systems as an acceptable means of reporting and to specify documentation to be retained for audit verification amended subparagraphs (a), (b)(1)(F)1. and 4.C., (b)(2), and (e) to delete gender-based language.
Amended October 1, 2008, effective December 31, 2008. Deleted second paragraph in subdivision (b)(4) to eliminate the obsolete requirement that grocers get Board approval before using an electronic scanning method to determine the amount of their sales of exempt food products. Also deleted last two sentences in subdivision (b)(2) and deleted subdivision (b)(3)(B)2.G. to remove language urging grocers to seek Board approval prior to using the modified purchase-ratio and the cost plus markup methods for reporting tax.
Amended March 25, 2010, effective May 13, 2010. Amended subdivision (b)(1)(G) and corresponding footnote to utilize current tax rate of 8.25 percent in purchase ratio method calculation with tax included deduction.
California bill would require warning labels on sugary drinks
Sodas and most other sugar-sweetened drinks sold in California would be required to carry warning labels for obesity, diabetes and tooth decay under a bill introduced in Sacramento on Thursday and backed by several public-health advocacy groups.
California would be the first state to require such warning labels if SB1000 is approved. It would require the warning to be on the front of all beverage containers with added sweeteners that have 75 or more calories in a 12-ounce serving.
The label would read: "State of California safety warning: Drinking beverages with added sugar(s) contributes to obesity, diabetes and tooth decay."
Sen. William Monning, D-Carmel, who proposed the bill, said that there is significant research indicating a link between sugary drinks and those health problems, adding that the wording was developed by a national panel of nutrition and public-health experts. The bill has the backing of the California Medical Association and the California Center for Public Health Advocacy.
"The goal of the warning quite simply is to give consumers the right to know what are well-established medical impacts from consuming these beverages," Monning told The Associated Press in a telephone interview. "We're talking about a public-health epidemic that will take more lives than gun violence."
The Latino Coalition for a Healthy California and the California Black Health Network also are sponsoring the legislation, citing the heavy consumption of sugary drinks and associated health problems among minorities.
A bill similar to Monning's was introduced last year in Vermont, but it has been held in the Committee on Human Services since April. The Vermont bill would require manufacturers to put warning labels on beverages that "contain sugar or other artificial additives."
A growing body of research has identified sugary drinks as the biggest contributors to added empty calories in the American diet and as a major culprit in a range of costly health problems associated with being overweight.
More than a third of U.S. adults and nearly 17 percent of children ages 2 to 19 are obese, according to the Centers for Disease Control and Prevention.
Efforts to curtail consumption of sugary drinks through taxes and other efforts have met fierce resistance from the U.S. food and beverage industry, which came out against the California labeling bill on Thursday.
CalBev, the California arm of the American Beverage Association, released a statement Thursday outlining its opposition to the measure.
"We agree that obesity is a serious and complex issue," the statement read, adding that most calories are consumed in the form of fats, oils and starches in food. "It is misleading to suggest that soft drink consumption is uniquely responsible for weight gain. In fact, only 4.0 percent of calories in the average American diet are derived directly from soda.”
The group would not put a price tag on complying with the proposed legislation but said the measure would increase the cost of doing business in California.
The medical groups backing Monning's bill countered with their own data, saying sugary drinks have been the largest source of added calories in the average American's diet in the past three decades. They also said one soda a day boosts an adult's chances of being overweight by 27 percent and a child's by 55 percent and can increase the risk of diabetes by 26 percent.
Monning equated the warning labels to similar efforts to control alcohol and tobacco and dismissed suggestions that the labeling would be another example of nanny-state government.
"It is not the responsibility of industry to protect the public health. It is the responsibility of government," he said, adding that consumers could still choose to drink the beverages. "We believe it's an appropriate role for government to play."
The warning labels would mesh, he said, with health campaigns and proposed ordinances in several California cities and elsewhere to discourage sugar consumption. San Francisco, for instance, is considering asking voters to approve a tax on soda and other sweetened drinks.
In New York City in 2012, then-Mayor Michael Bloomberg spearheaded a ban on sales of large sugary drinks, but the move was declared illegal by a state judge after a legal challenge by soft drink makers and a restaurant group.
New York's highest court has agreed to hear an appeal.
Strong industry opposition helped kill soda tax proposals in two other California cities, as well as in the ski resort town of Telluride, Colo. The cities of San Francisco and Berkeley are both considering soda tax measures this year.
Monning said warning labels can make a difference in consumers' choices, particularly when paired with other public-health campaigns warning of the dangers of obesity.
"We don't underestimate what we're up against," he said. "We're up against $100 million advertising campaigns."