Will California Introduce New Soda Taxes on Sugary Drinks?

The UK government made headlines in April when they introduced a nationwide sugar tax on soda beverages and it looks like California is trying to follow in their footsteps. The golden state has given the go-ahead to a new effort that is trying to bring about a nationwide sugar-sweetened-drinks tax. However, this measure will likely conflict with a recent compromise made between the State of California and the beverage industry.

This new measure, which is backed by California doctors, aims to reduce childhood obesity and dental disease rates in the state. The advocates behind this effort also hope to reverse a previous agreement made with the beverage industry which banned the formation of new local sugar taxes on soda beverages until 2031.

On Thursday, the California secretary of state’s office gave proponents, which include members of the California Medical Association (CMA) and California Dental Association (CDA), the go-ahead to start collecting signatures for this measure so that they can have it ready as a ballot measure for the 2020 election. According to the Legislative Analyst Office, this tax could raise $2 billion to $3 billion by 2022-2023, which could help to pay for public health programs. This effort is only targeting the sugar-sweetened soda industry and does not include diet sodas, milk, juice, infant formula and medical beverages.

This measure comes after the beverage industry and the State of California came to an agreement which banned new local soda taxes until 2031. This decision, which was made in June, came after the beverage industry funded a ballot measure which would have made it harder for local California governments to raise new revenues. However, Assembly Bill 1838, which was signed into law by Governor Jerry Brown, does not apply to statewide taxes.

The CMA and CDA want to take advantage of this loophole.

“For too long, California has lacked adequate support for programs that address the health effects of consumption of sugary beverages,” Natasha Lee, practicing general dentist and president of CDA, told CNBC. “With this initiative, our state has the opportunity to improve public health, especially among children.”

If successful, this measure would introduce a two-cent-per-ounce excise tax on sugary beverages. The CMA and CDA want the funds accumulated from this tax to go towards programs that work to prevent and treat medical and dental diseases that are linked to sugary drinks. The organization also plans to use a portion of these funds to provide better access to fresh fruits and vegetables as well as information on diseases that are linked to soda consumption.

On the other hand, The American Beverage Association (ABA) argues that soda-taxes are not necessary for bettering the health of consumers. In fact, the soda industry has been fighting against sugar taxes for the past decade and have spent $48.9 million on opposing campaigns against them since 2009.

“Everyday grocery shoppers in California are struggling with affordability in the state — from housing to transportation to taxes,” the ABA said in a statement. “Rather than further driving up costs at the supermarket, we believe there is a better way for health advocates, government and California’s beverage companies to work together to help people reduce sugar consumption while at the same time protecting consumers’ pocketbooks and the small businesses that are so vital to our communities.”

Nevertheless, areas that have already passed a sugar tax have seen a significant decline in soda sales. In the city of Berkley, California, which passed the nation’s first sugar tax in 2014, soda sales fell by 21 percent in 2016. Additionally, sugary-drink sales fell by 40 percent in Philadelphia within months of implementing a sugar tax. However, soda companies have been making up for this loss of sales by laying off their workers. Delaware Valley’s Canada Dry laid off a fifth of their workforce in Philadelphia after the sugar taxes were implemented.

This might be why major players in the soda industry have been investing in healthier product offerings. Recently, Pepsico invested $3.2 billion in acquiring SodaStream, which is a sparkling beverage machine and refill maker that is popular for their do-it-yourself carbonated water products. Rival company Coca-Cola has also been expanding their product portfolio through their recent acquisitions of BODYARMOR sports drinks and UK-coffee company Costa Limited.

With this potential sugar tax on its way to becoming a ballot measure, California might be the first American state to have a state-wide sugar tax. However, this proposal needs 585,407 signatures from registered voters in order to qualify as a ballot measure for the 2020 election. Advocates have until early March 2019 to collect and submit signatures.