Sugary Drink Tax Policy Brief

By Jude Luke, Center for Closing the Health Gap

Type II Diabetes is a growing health issue that is directly correlated with over 1.5 million
deaths worldwide. Sugary drinks in particular are a factor in developing diabetes with a 2010
study indicating that one to two sugary drinks a day increases the risk of developing Type II
Diabetes by 26%. Sugary drinks are also associated with other public health issues like heart
disease and obesity. In America specifically, obesity was estimated to accumulate over $147
billion in medical costs in a year. Additionally, a 2009 American Heart Association report noted
that sugary drunks are the largest contributor of additional sugars in Americans’ diet. In light of
these facts, it is not unreasonable to consider a soft-drink tax as a viable option to alleviate public
health concerns and save lives. Soda taxes are supported by related tobacco taxes, the potential
revenue generated through tax, and international sweet-beverage taxes in countries like France,
United Kingdom, and Mexico, which have proven to be successful. Additionally, several United
States localities have taken the initiative in passing a tax on sugary drinks. Among these areas
are Berkeley, Philadelphia, San Francisco, Oakland, Boulder, Seattle, Cook County, and Albany
(California). In this brief, the various aspects of these American cities’ policies will be explored.

Berkeley, California and Philadelphia, Pennsylvania were the first two cities to pass a policy
implementing a tax on sugary drinks. Berkeley, a city of 121,240 individuals, proposed a
measure with a sales tax at a rate of $0.12 per twelve ounce can. The tax was designated a
general tax, rather than a special tax. While a special tax would have allowed tax revenue to be
reutilized for a specific purchase, such as school nutritional education programs, special taxes
would require a 66.67% supermajority vote. As a result, the general tax option, which requires
just a simple majority, was chosen with tax revenue being added to the city of Berkeley general
fund. The measure in Berkeley passed with an impressive 76.17% of residents supporting the
policy. The following was the question listed on the ballot:

“Shall an ordinance imposing a 1¢ per ounce general tax on the distribution of high-calorie,
sugary drinks (e.g., sodas, energy drinks, presweetened teas) and sweeteners used to sweeten
such drinks, but exempting: (1) sweeteners (e.g., sugar, honey, syrups) typically used by
consumers and distributed to grocery stores; (2) drinks and sweeteners distributed to very small
retailers; (3) diet drinks, milk products, 100% juice, baby formula, alcohol, or drinks taken for
medical reasons, be adopted?”

The specific ordinance enacted by the measure is comprised of seven sections. Section one is
comprised of background information regarding public health concerns, advertising intentions of
sugary drink companies, development of sugary drinks, economic costs, and dental concerns. It
is also worth noting that the language utilized in the ordinance highlights disparities in sugary-
drink related conditions as well.

“Section 1. Findings:
C. While there is no single cause for the rise in diabetes, obesity, and tooth decay, there is
overwhelming evidence of the link between the consumption of sugary drinks and the incidence
of diabetes, obesity, and tooth decay.
F. At the same time, hundreds of millions of dollars have been spent in an ongoing massive
marketing campaign, which particularly targets children and people of color. In 2006 alone,
nearly $600 million was spent in advertising to children under 18. African American and Latino
children are also aggressively targeted with advertisements to promote sugar-laden drinks.
I. An Asian resident of Berkeley is almost 3 times more likely than a white resident to have been
diagnosed with diabetes, and an African American resident of Berkeley is 14 times more likely
than a white resident to be hospitalized for diabetes.”

Section two of the ordinance is the Purpose and Intent section which simply states some of
the desired goals of the ordinance. Section two does list some clarifications regarding the
intention of the ordinance regarding regulation, small businesses exemptions, and the purpose of
tax revenue. Section three restates some of the previous information but also provides
exemptions, requirements, and definitions within the proposed chapter to be added to Berkeley
Municipal Code:

“Section 7.72.020 Exemptions:

The tax imposed by this Chapter shall not apply:
A. To any Distributor that is not subject to taxation by the City under the laws of the United
States or the State of California;
B. To any Distribution of a Sugar-sweetened beverage product to a Retailer with less than
$100,000 in annual gross receipts, as defined in Section 9.04.025, in the most recent year;
C. To any Distribution of Natural or common sweeteners; or
D. To any Distribution of Added caloric sweeteners to a Food Products Store as defined in
Section 23F.04.010, if the Food Products Store then offers the Added caloric sweetener for sale
for later use by customers of that store.

Section 7.72.030 Definitions:

A. “Added caloric sweetener” means any substance or combination of substances that meets all
of the following four criteria:
1. Is suitable for human consumption;
2. Adds calories to the diet if consumed;
3. Is perceived as sweet when consumed; and
4. Is used for making, mixing, or compounding Sugar-sweetened beverages by combining the
substance or substances with one or more other ingredients including, without limitation, water,
ice, powder, coffee, tea, fruit juice, vegetable juice, or carbonation or other gas.
An Added caloric sweetener may take any form, including but not limited to a liquid, syrup, and
powder, whether or not frozen. “Added caloric sweetener” includes, without limitation, sucrose,
fructose, glucose, other sugars, and high fructose corn syrup, but does not include a substance
that exclusively contains natural, concentrated, or reconstituted fruit or vegetable juice or any
combination thereof”

Section 7.72.090 is particularly important for its call to creation of a panel of experts:

“Section 7.72.090 Sugar-Sweetened Beverage Product Panel of Experts

A. There shall be established the Sugar-Sweetened Beverage Product Panel of Experts to make
recommendations on how and to what extent the City should establish and/or fund programs to
reduce the consumption of sugar-sweetened beverages in Berkeley and to address the effects of
such consumption.
B. An officer or employee of the City designated by the City Manager shall serve as secretary of
the Panel.
C. In accordance with Chapter 2.04, the Panel shall be composed of nine members appointed by
the City Council.
D. Terms shall expire and vacancies shall be filled in accordance with the provisions of Section
2.04.030 through 2.04.145 of this Code.
E. Each member of the Panel must:
1. Have experience in community-based youth food and nutrition programs; or
2. Have experience in school-based food and nutrition programs and be referred by the
Berkeley Unified School District; or
3. Have experience in early childhood nutrition education; or 4. Have experience in
researching public health issues or evaluating public health programs related to diabetes,
obesity, and sugary drink consumption; or 5. Be a licensed medical practitioner.
F. In accordance with Section 3.02.040, members of the Panel may be reappointed but shall not
serve more than eight consecutive years.
G. The Panel shall, by majority vote, do each of the following: 1. Annually appoint one of its
members as chair and one of its members as vicechair; 2. Approve bylaws to facilitate the proper
functioning of the Panel; 3. Establish a regular time and place of meeting. All meetings shall be
noticed as required by law and shall be scheduled in a way to allow for maximum input from the
public. Minutes for each meeting shall be recorded, kept, and maintained; and 4. Publish an
annual report that includes the following: a. recommendations on how to allocate the City’s
general funds to reduce the consumption of sugar sweetened beverages in Berkeley and to
address the results of such consumption; b. information, if available, concerning the impact of
this Chapter on the public health of the residents of the City; and c. any additional information
that the Panel deems appropriate.
H. Within 15 days of receipt of the publication of the Panel’s annual report, the City Manager
shall cause the report to be published on the City’s Internet website and to be transmitted to the
City Council and the Governing Board of the Berkeley Unified School District.”

Sections four through seven simply list some of the other stipulations of the ordinance including
duration, severability, and environmental requirements.

Despite proposing a sound measure, Berkeley faced a strong opponent. Californians for Food
& Beverage Choice was an organization created by and supported by the American Beverage
Association which opposed the measure in Berkeley as well as a similar measure in San
Francisco. The organization’s argument against the beverage tax rooted in a regressive tax being
ineffective, and the impact on businesses and consumers being too immense. In light of this
argument, it is worth noting the considerable success of tobacco taxes on hampering tobacco
purchase, as well as Section 7.72.020 of the ordinance which exempts retailers with less than
$100,000 in annual gross receipts. Additionally, it is worth noting that in August 2015,
researchers found that average prices of beverages included in the law only rose by less than half
the designated tax amount.
 Although average prices were lower than expected, a 2016 UC Berkeley study demonstrated a
21% drop in drinking of sugary beverages in low-income neighborhoods. Additionally, a 2017
before and after study concluded that sugary drink sales decreased by 9.6%, while overall
consumer spending was unchanged. This study demonstrates that a tax on sugary drinks bears no
effect on consumer spending or overall grocery bills, while subsequently resulting in an increase
in water consumption.

Efforts in San Francisco to pass a 2014 sugary beverage tax of $0.02 per ounce failed due to
not meeting a 66.7% supermajority (55.59%), but a renewed 2016 proposition of $0.01 per ounce
passed as a general tax with a 62.49% majority. Since the 2016 effort was a second attempt, there
was a significant amount of support associated with passing the proposition from organizations
like the American Heart Association, American Diabetes Association, California Dental
Association, Latino Coalition for a Healthy California, Public Health Institute, Prevention
Institute, The American Academy of Pediatrics, Physicians of Social Responsibility San
Francisco Bay Area, and the San Francisco Medical Society. Additionally, the San Francisco
Medical Society, the NAACP, American Heart Association, San Francisco Dental Society, and
NICOS Chinese Health Coalition all signed the official argument in favor of passing the
measure.

When examining the specific ordinance passed in San Francisco, distinct similarities in text
and content to the ordinance passed in Berkeley can be observed. Unsurprisingly, Berkeley is
cited within the ordinance several times as supporting evidence. The most notable similarities
observed are in the language of the ordinance, background information, and setup of various
sections regarding justifications (with some rooted in disparities), definitions, exemptions, and
the creation of an expert panel.

Similar to Berkeley, the primary, and only, opposition was the American Beverage
Association California PAC. This is not an uncommon occurrence though, with the American
Beverage Association being the primary opposition in Berkeley, San Francisco, Philadelphia,
Cook County, and other locations. Additionally, a common theme in most areas of sugary
beverage taxation has been the stark contrast in spending between supporters of propositions and
the American Beverage Association. In San Francisco for example, the ABA California PAC
spent nearly $10 million as opposed to a collective $2.6 million from supporters of the
proposition. This pattern of exorbitant spending on lobbying by the ABA to counter soda tax
initiatives is not uncommon though with over $11 million spent in New York in 2010, $2.4
million over 2 years in Berkeley, and $2.6 million from 2012-2013 in Richmond (population of
107,000).

In light of other cities’ efforts, it appears important to promote a potential tax as a specific tax,
in order for funds to directly go towards childhood health education, or a related cause.
Additionally, having the support of multiple health organizations and precise wording that make
the intentions of the tax explicit appear to be essential to passing a successful tax. While the
effort to pass a ‘soda tax’ may be difficult, it appears viable. The benefits incurred by the
institution of said tax would have far reaching implications regarding the health and well-being
of the residents of Cincinnati. By joining hands with other medical and public health
organizations, Cincinnati can work to reduce its incidence of a host of medical issues.
San Francisco 2016 Initiative:
https://ballotpedia.org/San_Francisco,_California,_Soda_and_Sugary_Beverages_Tax,_Propositi
on_V_(November_2016)

http://voterguide.sfelections.org/en/tax-distributing-sugar-sweetened-beverages

Berkeley 2014 Initiative:

https://ballotpedia.org/City_of_Berkeley_Sugary_Beverages_and_Soda_Tax_Question,_Measur
e_D_(November_2014)

http://web.archive.org/web/20140815151220/http://www.ci.berkeley.ca.us/Clerk/City_Council/2
014/07_Jul/Documents/2014-07-01_Item_23_Placing_a_Sugar-Sweetened_-_Rev.aspx

ABA Spending:
http://www.washingtonpost.com/wp-dyn/content/article/2010/07/13/AR2010071303494.html

General Information:
https://en.wikipedia.org/wiki/Sugary_drink_tax