Is the Soda Tax on Your Ballot Actually a Grocery Tax?

Supporters of taxing soda distributors in San Francisco, Oakland and Albany see these November 2016 ballot measures as a fundraising tool to stem a growing Type 2 diabetes epidemic. But opponents say it's really a "grocery tax" that will hurt low-income residents and small businesses.

So which one is it, a soda tax or a grocery tax?

By charging distributors 1 cent per ounce of sugar-sweetened drinks they bring into a city, all three Bay Area ballot measures aim to raise significant funds --  over $7.5 million in San Francisco, $6 million in Oakland and $220,000 in Albany per year -- for health and education programs to reduce the consumption of sugary drinks.

"To really educate young people, catch them early and teach them what comes from consumption of sugary beverages, the damage that causes," said Annie Campbell Washington, Oakland vice mayor, City Council member and a big supporter of the tax.

That probably sounds terrifying to the soda industry. So the American Beverage Association, representing giants like Coca-Cola and Pepsi, has spent more than $14 million to fight the proposals, which are pretty similar in all three cities. Their massive ad campaign in the Bay Area often features small-business owners of color.

"I have a dream to expand my business. This tax could kill it. Join me, vote no on the S.F. Grocery Tax," says Danielle Reed, a cafe owner, in one of the ads.

What Campaigns Are Saying

Both campaigns for and against the tax have gone door to door in disadvantaged, diverse areas the soda industry heavily markets to, like San Francisco's Tenderloin and Oakland's Fruitvale.

While the pro-tax team points to evidence linking sugary drinks to obesity, diabetes, tooth decay and other health problems, the No on Grocery Tax promoters make an economic argument. They say that distributors will pass on the cost of a soda tax to small-business owners, who might need to raise the prices of other items they sell in order to stay competitive, hence the "grocery tax" tag.

Abdul Taleb, owner of a small grocery in Fruitvale, heard the latter argument, and now he's worried he'll lose customers if Oakland's Measure HH passes -- so he's voting no. Sugary beverages account for more than 10 percent of his sales.

"It’s part of our business and we have to stay as competitive as we can in order to keep people in our neighborhood. And we are already struggling to keep people here," Taleb said, adding that larger supermarkets are able to absorb extra costs more easily.

Taleb supports healthy choices for his customers -- his store specializes in fresh fruits and vegetables. But he doesn't believe Oakland would actually use any additional funds from a soda tax toward public health education that could benefit his neighborhood in the long run.

"It's absolutely not true," Taleb said.

All three measures say the tax funds would go to their city's general fund. Proposition V in San Francisco and Measure HH in Oakland would also require the creation of advisory boards made up of residents and public health experts that would recommend to the City Council how to spend those funds, while Albany's Measure O1 would also seek public input to spend additional funds.

In Berkeley, the first city in the U.S. to implement a soda tax last year, additional dollars have been allocated toward health programs for children and other residents.

Before Berkeley, dozens of similar attempts had failed around the country, such as in Richmond in 2012 and San Francisco in 2014. Berkeley's law inspired the current round of proposals that voters are deciding on in the Bay Area but also in Boulder, Colorado, on Nov. 8.

How Is the Nation's First Soda Tax Working?

Berkeley raises about $1.5 million per year from its soda tax, which goes into the city's general fund.

So far, the city has allocated about $2 million to nutrition and gardening programs at public schools, and local organizations bringing fresh fruits and vegetables at a subsidized price into lower-income neighborhoods, said Xavier Morales, who sits on the advisory panel. Morales is the current executive director of the Praxis Project and former executive director of the Latino Coalition for a Healthy California.

"We are raising these funds so we can go into communities that have fewer resources and be able to make the healthy choice the easy choice for them," said Morales, who lives in southwest Berkeley, an area with a higher concentration of Latino and African-American residents than other parts of the city.

Morales helped pass Berkeley's soda tax in 2014 and battled an aggressive anti-tax campaign then, which also claimed poor residents would bear the brunt of the cost of the tax, while saying the money might not go toward improving health, he said.

"You've got to remember, these are multibillion, global corporations trying to protect their profits on the backs of the most vulnerable communities," Morales said. "They'll say anything to deflect attention from the real issue, and that is that sugar is not healthy."

'Not a Grocery Tax' in Berkeley

Jennifer Freese, who owns a small corner store in southwest Berkeley, said the soda tax has not hurt her business, and the paperwork to comply has not been too cumbersome. Freese is technically a distributor because she brings ice teas and other sugary drinks to her store from an Oakland warehouse.

"The city of Berkeley has a one-page form. We fill it out, write our check and mail it in," said Freese. "It's just like another part of bookkeeping."

She passes on the cost of the tax directly to the price of the sugary drinks for sale in her store, but not the price of other groceries.

"If it's a 12-ounce soda, we pay 12 cents in tax, and we add 12 cents onto the price of the soda for our customers," she said.

That is also what dozens of other mom-and-pop corner stores, supermarkets and restaurants across Berkeley report doing, so the soda tax has not worked out to be a grocery tax in that city, said Jennifer Falbe, a researcher at UC Berkeley's School of Public Health.

A Cornell University and University of Iowa analysis found that only a small portion of the soda tax was reflected in the price of sugary drinks in the first few months after the ordinance took effect. But the preliminary findings of another study by the Oakland-based Public Health Institute looked at retail scanner data of millions of transactions in Berkeley and found the cost of the tax was predominantly passed on to the price of sodas and other sugar-sweetened beverages.

"We also did not see a rise in the average grocery bill," said Lynn Silver, one of the researchers with the Public Health Institute.

Higher sugary drink prices do not seem to be forcing any small businesses to close, said Falbe. But stores on the border with Oakland have mixed feelings about it, in part because customers can buy cheaper sodas just a few blocks away, she said.

"Some of the businesses that we interviewed mentioned that it would make things easier for them if it wasn’t just one city, Berkeley, that had a tax like this, but if it was over a larger geographic region like the county or the state. That might simplify things for them," Falbe said.

Falbe's team also polled people in Berkeley's low-income areas before and after the soda tax was implemented, and concluded that sugary drink consumption declined by 21 percent. Because that survey was conducted only a couple of months after the soda tax went into effect, Falbe suspects the political campaign to approve the tax also influenced people's behavior by raising awareness of the health impacts of sugary drinks.

The tax proposals on this year's ballot would not impact milk, 100 percent juice, baby formula, diet drinks or drinks taken for medical reasons.