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Soda tax crushed in Santa Fe, under consideration in Seattle


 No soda tax for Santa Fe at this time.

A proposed soda tax in Santa Fe, New Mexico, was solidly defeated by voters during a special election on May 2.

The 2-cents per fluid ounce sugar-sweetened beverage tax on distributors made it on the ballot with the backing of Santa Fe Mayor Javier Gonzales and several city councilors. It was endorsed by the Archdiocese of Santa Fe and had the support of former New York City Mayor Michael Bloomberg, who spent approximately $1 million to help pass the tax. Nonetheless, the proposed tax on sugary beverages was defeated 57 to 43 percent (official election results).

Sugary beverage tax would improve education

The tax was billed more as a way to fund early childhood education and less as a tax on drinking choices. In his 2017 State of the City Address, Mayor Gonzales spoke of his plan to “expand high-quality early childhood education to every 3- and 4- year old in Santa Fe.” He said the city could create 200 new jobs and improve every classroom in every K-12 school, giving all children “a chance to begin life in Santa Fe on equal footing.” This would be funded by “a small tax on distributors of sugar-sweetened beverages.”

Sugary beverage tax would improve health

However, the mayor did touch on the health risks associated with drinking sugary beverages. He pointed out that consumption of a wide variety of sugary drinks, including sugary juices and sugary Starbucks drinks, has been “directly linked to heart disease, diabetes and obesity for children and adults alike.” Furthermore, low-income families need not pay more for their drinks or go thirsty under his plan, which allowed an exemption for “diet drinks, healthy juices, milks, and dozens of other choices.”

Opposition found an audience

Taxing the distribution of sugary beverages was opposed by the American Beverage Association and Better Way for Santa Fe & Pre-K, a coalition of local groups. Opponents focused on the regressive nature of the tax (it would disproportionately affect low-income and working class families), its potential cost to consumers, and the fact that it could apply to “more than a thousand beverages… — even kombucha!”

The message appears to have found an audience. An astonishing 37.6 percent of registered voters participated in the election, which is greater than the turnout for the 2014 mayoral race.

Up next: soda tax battle moves to Seattle

Seattle Mayor Ed Murray also proposed a tax on the distribution of sugary beverages in his State of the City Address. Like the Santa Fe plan, it would fund specific education projects and apply to a variety of sugary drinks in addition to sodas, including bottled Starbucks coffees and sweetened teas.

However, the mayor revised his initial plan after learning of the “disparate impacts the tax could have on people with low incomes and people of color.” The plan he ultimately sent to the City Council would be 1.75 cents per ounce (rather than the 2 cents he initially proposed) and would also tax diet drinks with “noncaloric sweeteners.” Learn more about the new proposed sweetened beverage tax.

Existing soda taxes

Santa Fe and Seattle are not acting in isolation. Berkeley, California, was the first city to impose a tax on sugary beverages, in 2015. Similar taxes then took effect in the Navajo Nation and the state of Vermont.  Philadelphia instituted a tax on the distribution of soda on January 1, 2017, to raise revenue for pre-K education programs. It is being challenged by the American Beverage Association.

Boulder, Colorado, Cook County, Illinois, and Oakland, California will tax sweetened beverages beginning July 1, 2017. Sugar-sweetened beverages will be subject to tax in San Francisco on January 1, 2018 (Soda taxes sweep nation), the same day candy and soft drinks will see a rate increase in Arkansas. A soda tax has been approved in Albany, California; and a special tax on sweetened beverages is under consideration in Massachusetts.

Furthermore, these taxes are not only taking hold in the United States. Mexico’s tax on sweet drinks appears to be reducing consumption as the government hoped. A soda tax took effect in South Africa last month, and the Brits are hammering out the details of their upcoming soda tax.

The trickle-down effect of tax changes

Changes in product taxability, such as a new tax on the distribution of sugary drinks, can create tax compliance challenges for the businesses required to collect and remit the tax. The fact that the taxes differ from state to state and city to city adds to the complexity.

Tax automation software facilitates tax compliance for businesses of all sizes in all states. Learn more about end-to-end tax compliance solutions.

 


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.