Seattle just made it more costly to consume sugary beverages, joining the likes of Boulder, Colo., San Francisco, and Philadelphia. Under city ordinance CB 118965 passed by the Seattle City Council on June 5, any beverages containing “added caloric sweeteners” are subject to taxA tax is a mandatory payment or charge collected by local, state, and national governments from individuals or businesses to cover the costs of general government services, goods, and activities. ation of 1.75 cents per fluid ounce. This includes sports drinks, energy drinks, certain fruit juices, and of course, soda. For a 2-liter bottle of soda, the tax would be approximately $1.18.
Alcoholic beverages, sweetened medicine in liquid form, milk-based products like baby formula, and drinks consisting of 100 percent juice are excluded from this tax. There is still some confusion as to how coffee beverages with sweetened syrups would be affected by this policy. This exclusion has created some controversy, as it cuts into the revenue potential of the tax.
A “Sweetened Beverage Tax Racial Equity Toolkit” analysis conducted by Seattle community members and health experts before passage of the tax also showed “whites and high-income Americans are more likely to drink diet soda compared to communities of color and low-income Americans.” Notably, diet sodas will be excluded from the tax, with the ostensible rationale being that zero-calorie beverages do not contribute to obesity. This exclusion has created some controversy, as it cuts into the revenue potential of the tax. Of course, the tax still remains regressive even if applied to both diet and full-calorie beverages. If the soda taxA soda tax is an excise tax on sugary drinks. Most soda taxes apply a flat rate per ounce of a sugar-sweetened beverage. ordinance in Seattle goes unchallenged, low-income families will be hurt the most.
The tax will be implemented in 2018 and establishes a “Sweetened Beverage Tax Community Advisory Board” to budget the estimated $15 million annual tax revenues that will be raised from the tax. Primarily, the funds will go to education readiness and healthy eating programs in Seattle such as Fresh Bucks, which rewards low-income residents who use federal food stamps at local farmer’s markets. This program is supported partially by expiring federal grants, according to the ordinance.
Although the ordinance declares sugary beverage consumption as a large contributing factor to obesity and health issues for low-income households, soda sales have declined substantially in recent decades. In fact, a recent Fortune report notes the growing demand for bottled water over other beverages. As soda sales wane, revenues from the tax will likely decline as well, making it an unstable source of funding for healthy living programs like Fresh Bucks.
According to the ordinance, the tax will be levied on beverage distributers to discourage them from selling beverages. Before its passage, the soda tax ordinance saw opposition from local labor unions since the policy may affect jobs and small businesses. The final version of the ordinance includes a provision for up to $1.5 million for “job retraining and placement programs for workers adversely impacted by the tax.” Unfortunately, there are no explicit details as to how the jobs programs will work, but the existence of this provision implicitly acknowledges the negative employment impacts of the tax.
Despite recognizing that the soda tax will hurt businesses and local workers, the Seattle City Council passed it anyway. The ordinance also allocates $500,000 of the annual soda tax revenues for research on the health, behavior, and economic effects of the policy over the next five years. Thus, 13 percent of the estimated tax revenues will help workers displaced by the tax find jobs and fund assessment of the other effects of the soda tax, undercutting the City Council’s goal of raising money for local health and nutrition programs.
Seattle City Council Insight notes that there is still time for a referendum to repeal the tax before it takes effect, but only if opponents act quickly. A voter petition with 16,345 signatures would need to be filed within the next month, submitted to the City Clerk, verified by the Records and Election Office, and then authorized by the City Council to put a referendum on the November ballot.
If that doesn’t work, Seattle taxpayers might draw inspiration from citizens and businesses in Philadelphia who continue to fight the soda tax even after it has gone into effect. Those living outside of Seattle should also be wary of a soda tax proposal coming to their city or state.Share