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More soda taxes look likely


 Soda tax conundrum: the more we drink, the more money we generate to combat the ill effects of drinking soda.

Taxes on soda and other sweetened beverages seem to be sweeping the nation. They are established in Berkeley, California and the Navajo Nation, will soon take effect in Philadelphia, Pennsylvania, and were approved in four additional cities during the November 8, 2016 elections. Cook County, Illinois (home to Chicago) followed suit shortly thereafter, and now they are being discussed in Santa Fe, New Mexico, and the states of Alabama and Massachusetts.

Massachusetts

Former Massachusetts Governor Deval Patrick (D) was a strong proponent of taxing sugary drinks during his tenure, which ended in 2015. Nonetheless, proposed soda taxes never made it off the ground in the Bay State while he was in office. Some think the time has come to reopen the discussion, now that momentum for these taxes appears to be growing.

State Representative Kay Kahn of Newton has worked toward implementing a tax on sugary beverages and candy for years. She and other proponents of the tax believe it could raise more than $50 million annually while also improving the health of the population at large. Their reasons for backing such a tax are not unusual: evidence that consumption of soda and other sugary drinks increases the odds of diabetes, obesity, and obesity-related health problems; and evidence that extending sales tax to these beverages could cut consumption.

It still may be an uphill battle, given that Governor Charlie Baker (R) has not expressed his support and House leaders seem to be opposed to any new tax. But some believe even a failed attempt could be beneficial. According to Keith Mahoney of The Boston Foundation, a campaign to tax sugary drinks “can help create awareness in the community about the particular risks of sugar-sweetened beverages” (WBUR).

Santa Fe

Santa Fe, New Mexico Mayor Javier Gonzales and a number of city councilors are proposing a 2-cents-per-ounce tax on sugary beverages such as soda and sweetened teas (See Finance Committee Meeting Minutes from November 14, 2016, Exhibit 1). If their efforts are successful, the tax could generate more than $10.5 million annually, money that would fund early education programs. This would be “a game-changer for public education and the city,” according to Santa Fe Public Schools Superintendent Veronica Santa Fe Public Schools Superintendent Veronica García (Santa Fe New Mexican).

The opposition

The American Beverage Association, aka Big Beverage, has spent millions fighting proposed soda taxes. The organization takes issue with governments singling out their products with punitive taxes when they are not the sole cause of diabetes, obesity, or other health problems.

With respect to the proposed Santa Fe tax, ABA Spokeswoman Kendal Rowe pointed out the dangers of basing funding for early education on “an unreliable and unsustainable revenue source.” She noted, “Soft drink consumption has been declining for more than a decade.” Furthermore, soda taxes are believed to curb consumption. Why would the city want to build a program on such a shaky foundation?

The proposed tax also has detractors in the Santa Fe City Council itself. Finance Committee Chair Carmichael Dominguez raised concerns over the city’s “authority to impose the tax and about governance of the funding program, such as how the money would be distributed” (Albuquerque Journal).

Any new tax faces obstacles, and soda taxes are no different. Powerful lobbyists aside, new and higher taxes are simply unpopular. Yet they continue to be explored by states, counties, and cities, and if the election results of November 8 are any indication, people are increasingly seeing the sense in them.

Whatever happens with the taxes under consideration in Santa Fe and Massachusetts, their discussion illustrates a common problem for retailers: there are frequent changes in product taxability laws and policies. Tax automation software can’t keep tax rates or product taxability from changing, but it can help with sales and use tax compliance. Learn more.


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.