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The California Soda Tax War

  • Oct 26, 2012 | Gail Cole

Two California cities are on the front lines of the nation's burgeoning soda tax wars. On November 6, 2012, voters in Richmond and El Monte will decide on a penny-per-ounce tax on sugar-sweetened drinks. Supporters of the so called "Soda Tax" hope it will fatten city coffers and trim the waistlines of city residents.

A penny-per-ounce may not seem like much, but opponents of the tax worry that, if approved, the California soda taxes will "open the floodgates to similar taxes around the country." The history of taxes on cigarettes and other tobacco products is enough to fuel those fears.

In fact, The Tax Foundation points out that there are already similar taxes around the country. Arkansas, Tennessee, Virginia and West Virginia have "mild excise taxes on soda," and thirty-three other states tax soda differently than other groceries. Yet the proposed soda taxes in Richmond and El Monte would be "the largest taxes on soda in any American city." Furthermore, a penny-per-ounce equals $1.28 per gallon -- a rate that is "larger than any beer excise in the U.S."

The American Beverage Association, or ABA, is certainly willing to pay more than a penny an ounce to prevent a soda tax. To date, it "has spent millions of dollars to beat back soda taxes around the country." In addition to California, the industry  is focusing on New York City, where Mayor Michael Bloomberg has proposed restrictions on large-sized sugary drinks. The New York City Board of Health approved the ban on September 13, 2012; it is scheduled to take effect on March 12, 2013. (New York Times).

The Centers of Disease Control and Prevention report that "[m]ore than one-third of U.S. adults and approximately 17% of children and adolescents… are obese."  It reminds that "calories from drinks can really add up." Fair enough. Yet many voices, including The Tax Foundation, point out that soda taxes and other so-called sin taxes "disproportionately harm low-income individuals." Additionally, there is no guarantee that a tax on soda would lead to a reduction in obesity.

Money raised by the California tax would go toward "soccer fields, school gardens and programs to treat diabetes and fight childhood obesity." If approved by voters next month, "[i]t's projected to raise between $2 million and $8 million."

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Sales tax rates, rules, and regulations change frequently. Although we hope you'll find this information helpful, this blog is for informational purposes only and does not provide legal or tax advice.
Gail Cole
Avalara Author
Gail Cole
Gail Cole
Avalara Author Gail Cole
Gail began researching and writing about sales tax in 2012 and has been fascinated with it ever since. She has a penchant for uncovering unusual tax facts, and endeavors to make complex sales tax laws more digestible for both experts and laypeople.