SODA TAX LOSING FIZZ
INDUSTRY AND CONSUMER OPPOSITION MOUNTS
Less than two months after the largest soda tax in the U.S. went into effect, embattled lawmakers in Cook County, Illinois — the home of Chicago — are already poised to repeal it.
The tax has been plagued, in its very short life, by legal challenges, implementation glitches and a screeching, multi-million-dollar media battle between the soda industry and public health groups. In recognition of growing public pressure, Cook County’s Board of Commissioners is expected to vote to roll back the tax, effective as soon as Dec. 1.
It’s a major victory for Big Soda, which has spent millions on ad buys, lobbyists and political contributions in the county. It’s also the second blow this year to the soda tax movement, which suffered a defeat in Santa Fe in early May.
Advocates of that movement — which include a number of top public health groups and former New York City mayor Michael Bloomberg — have advanced the taxes as a means to fight obesity while also raising revenue for local jurisdictions.
But critics say the collapse of the Cook County tax is proof the national soda tax movement is losing its momentum.
“Consumer outrage is off the charts,” said David Goldenberg, a spokesman for the industry-funded Can the Tax Coalition. “People know this tax is all about raising revenue to fuel more county spending and they resent the idea of a billionaire from New York City coming in and telling them what they should do here in Cook County.”
Unlike other cities and counties that have passed soda taxes in recent years, Cook County was arguably cursed from the start.
The county of 5.2 million people was already contending with budgetary woes and widespread voter frustration with state and local government when the board voted in November 2016 to levy a one-cent-per-ounce tax on soda and other sugary drinks.
The measure was pitched largely as a means to plug a US$1.8 billion budget gap, and secondarily as a means to improve public health by discouraging the consumption of beverages linked to obesity and other conditions.
In an Oct. 5 budget address, Cook County President Toni Preckwinkle, the most stalwart defender of the soda tax, argued that county services — including hospitals, clinics and community intervention programs — would suffer without the tax.
“A vote to repeal is a vote to reduce vital community investments,” she said. A spokesman for her office declined to comment on the likely repeal of the tax.
But there were early signs that the soda tax might not raise the revenue advocates hoped, and certainly not on the intended schedule. The policy’s rollout was dogged by implementation errors and legal challenges.
An early version of the tax, for instance, was aimed at distributors, who would then pass the cost on to consumers. But the county was forced to revise that plan when it realized that it would make the soda tax subject to an additional sales tax, which is illegal in Illinois.
Shortly after that, the county proposed making the tax a line item at the point of sale, much like sales taxes are assessed currently. But local governments are not allowed to tax transactions that are paid for using federal nutrition benefits, which meant Chicago had to exempt more than 870,000 people from paying the tax — a last-minute change that dented revenue expectations.
When the tax finally did go into effect on Aug. 2, following a lawsuit by the Illinois Retail Merchants Association, it was met with staunch public opposition: Consumers have organized highly visible boycotts, driving to nearby Indiana for groceries, and flooded their representatives with complaints.
Several Cook County commissioners who switched their votes in favour of repeal have cited that outrage.
“I listened to the community, the residents I represent, and there’s been a strong outcry,” Commissioner John Daley told the Chicago Tribune. “It’s a lot of taxes they’ve been hit with. It’s every economic group.”
The question now — for soda tax critics and supporters alike — is whether Cook County’s failed soda tax is a sign of things to come in other jurisdictions. While the battle was ostensibly fought by state and country groups, it’s well-acknowledged on both sides that local soda tax skirmishes are essentially proxy wars between the national soda industry and well-moneyed public health groups.
In Cook County, the Can the Tax Coalition, an anti-tax group funded by the American Beverage Association, has spent more than US$3.2 million on TV and radio ads. Repeal advocates have paid constituents of target districts US$11 per hour to circulate antitax petitions.
Michael Bloomberg, meanwhile — the former New York City mayor who has made the soda tax battle his own — is said to have spent more than US$5 million on radio and ad campaigns since mid-August, and an unknown amount on lobbyists and mailers. Both Bloomberg and the soda industry have committed to backing commissioners who supported their cause in next year’s elections.
The billionaire was also involved, with the American Heart Association and the Laura and John Arnold Foundation, in the wave of local soda taxes that swept through six cities in 2016. That established new sugary drink policies in Boulder, Colorado, San Francisco and Cook County.
But where that movement once seemed unstoppable, cracks have begun to show. In May, Bloomberg and others backed a failed soda tax referendum in Santa Fe, New Mexico, which voters rejected by a wide margin.
Philadelphia’s soda tax, in effect since January, has also failed to generate the revenue that backers initially expected. That has limited the reach of the pre-K program the tax was set to fund, and has empowered some of the policy’s critics.
“The results have been shifting as local municipalities, residents and business learn more about the devastating impact these taxes have on working families and businesses, and how they aren’t good budget solutions,” Goldenberg said.
But it’s likely too early for Big Soda to gloat, experts caution. An analysis of the political and demographic climates in cities that successfully passed soda taxes, published in the journal Food Policy this year, concluded that as many as 40 per cent of Americans live in cities with the right conditions to pass their own taxes. Those include external financial support and Democratic Party dominance.
Seattle’s city council passed a tax in June. Massachusetts and Tennessee have also expressed interest, said Jim O’Hara, the director for Health Promotion Policy at the non-profit Center for Science in the Public Interest.
IT’S A LOT OF TAXES THEY’VE BEEN HIT WITH.