Voters Consider Initiative to Block Local Taxes on Sweetened Beverages

by Carolyn Bick

Though Initiative 1634 is billed as a no new groceries tax, big soda companies have provided most of the funding for the campaign supporting the initiative. The same big soda companies are the ones responsible for passing on the cost of the city’s sweetened beverage tax to consumers through retailers.

Initiative 1634 is supposed to stop any new taxes on grocery items in the state of Washington, claiming to take “a stand to bring fairness to our tax structure, to protect jobs and neighborhood businesses and to prevent excessive taxation on what we eat and drink.”

The initiative responds to a tax the Seattle City Council imposed on sweetened beverages at the beginning of 2018 that is projected to bring in $22 million in the first year to fund community programs such as the Fresh Bucks program and the Farm to Table initiative. If passed it would prevent local governments from passing similar taxes on sodas and groceries.

Washington does not tax other grocery items, except for bottled water and prepared foods. No cities or towns in Washington followed Seattle’s lead and proposed taxes on food or drink items. Though a Washington House bill currently in committee would impose a similar beverage tax on distributors, I-1634 applies only to local and not state taxes. If passed, the state bill requires an impact study be conducted, first.

The I-1634 coalition registered with Washington’s Public Disclosure Commission to begin the process of getting the initiative on the November ballot on the last day of February, following the city’s implementation of the sweetened beverage tax on Jan. 1, 2018. The standard tax rate is $0.0175 per ounce. As of September, the tax had raised $10 million, prompting the city to raise its projected revenue estimates from about $14.8 million to as much as $22 million by the end of the year.

Supporters of I-1634 want to prevent similar taxes from spreading to other cities or the state. Opponents say the initiative is not the will of the voters, but a campaign backed by large corporations attempting to dodge taxes to pay for community services.

The initiative, nicknamed “Yes! to Affordable Groceries”, would not take away Seattle’s sweetened beverage tax, but it would prevent other cities or towns from implementing a similar tax. The initiative purports to protect consumers from grocery taxes — its homepage lists meat, dairy, and beverages as potentially taxable items — but there is no evidence that cities or towns in the state are considering new taxes on food or beverages.

Moreover, it is the soda companies that are backing the initiative, not the retailers that sell their products or the Seattle City Council, that are responsible for passing the sweetened beverage tax down the line, in the first place.

“A soda company distributing its product to a retailer in Seattle would be liable for the tax on that distribution,” City of Seattle Deputy Communications Director for the Department of Finance and Administrative Services Cyndi Wilder said in an email to the Emerald. “It is a private business decision whether that company chooses to pass on costs of the tax to the retailer.”

Jim Desler, spokesperson for the Yes! to Affordable Groceries initiative, refused to speak to why companies opted to pass on the tax to retailers, instead of paying it themselves. He said that he doesn’t represent the beverage industry, and ultimately could not speak to that.

While Seattle’s tax would stay in place, if the initiative passes, it would prevent any other cities in Washington state from implementing a similar tax. Big soda companies are providing most of the funding for the ballot item. According to the Public Disclosure Commission’s (PDC) webpage on contributions to the I-1634 campaign, there are only eight backers, the top four of which are corporations with an international presence.

According to the PDC data, Coca-Cola has contributed about $9.65 million; Pepsico has contributed about $7.27 million; Keurig-Dr. Pepper has contributed about $2.1 million; before it became Keurig-Dr. Pepper, Dr. Pepper-Snapple Group contributed more than $900,000; Red Bull North America contributed more than $230,000; the Washington Food Industry Association contributed $20,000; Columbia Distributing contributed $3,750; and the Washington Hospitality Association contributed $266.31.

Moreover, a 2017 report by the Center for the Science in the Public Interest showed that soda industry groups have spent about $107.4 million fighting sugary beverage taxes across the United States since 2009.

Emma’s BBQ owner Tess Thomas has signed on to the initiative, because she feels the effects of the tax, even though it was the companies’ decision to pass on the tax to businesses, forcing her to work more and spend money on her business. She said she now spends more on gas, because of the tax: in order to avoid paying the extra fee, she drives to other cities to buy sugar-sweetened drinks. But she still has to increase her prices to account for the money she spends on gas, in order to stay in the black.

When she learned it is the soda companies that are responsible for passing along the tax, Thomas said it didn’t change her mind about the soda tax, or her support for the initiative.

“It certainly doesn’t stop me from wanting to keep them from taxing any other products any further,” Thomas said. “But it does make me start thinking if the soda manufacturers are making big dollars off the sale, also, why aren’t they willing to want to share some costs?”

Got Green’s Food Access Organizer Tanika Thompson said it’s hard to believe the ballot item has to do with protecting the consumer from a tax on groceries. Thompson said Got Green opposes I-1634, because the initiative appears to be a reaction to Seattle’s sweetened beverage tax, and is more about protecting these companies’ bottom line.

“It’s just to protect their profit, basically. They are just trying to get the community on their side, make the community think that there is a threat of a grocery tax, saying that if they tax your sodas, they will tax your food, just because they are trying to protect the sugary beverages,” Thompson said. “They are really just trying to protect themselves. They are saying they care about communities, when, really, they don’t, because they are the ones that passed it on.”

When asked how these companies’ profits would be affected, should a sugary beverage tax like Seattle’s be implemented in other Washington state or national municipalities, Desler said, “I don’t think that’s the issue at all. It doesn’t have to do with the bottom line. It has to do with fairness, in terms of a disproportionate amount placed on low-to middle-income families in the state of Washington.”

Healthy King County Coalition’s Program Manager Val Thomas-Matson said barring such a tax throughout the rest of the state would take away the opportunity for cities to raise funds to put back into the communities who would be most affected, and who would most benefit from these funds, as the City of Seattle does. A community advisory board comprised of community members and local organizations makes the recommendations for how to direct the collected tax dollars. The money has so far been used to fund various food and education programs meant to help close the food security gap, and better the health of communities most impacted by the tax. The committee presented its 2019 recommendations for the funds in September.

“One of the things that is at stake if yes [to I-1634] is our answer is that we take away the opportunities for other municipalities in the state of Washington to raise funds to do good things with them,” Thomas-Matson said. “That is a very heavy hand to just come out and wipe away those options for raising funds to do good in one fell swoop, because industries don’t like it.”

Thomas said she doesn’t think the way the money from the sugary beverage tax has been used has made a difference for her community. Thomas wants to see the revenue put into programs that help with medical care directly, not just educate the public about the dangers of obesity, diabetes, and other conditions associated with overconsumption.

“Does it pay for medical care for those individuals, not just talking about what it’s going to do? Those are the things that I am most concerned about,” Thomas said. “You hear all the talk of, ‘It’s going to go back into training, it’s going to go back into this, going to go back into that.’ … When they start talking about, ‘If we can get you to stop,’ can we then look to helping you pay for some medical cost that were incurred because of what you did to yourself?”

Feature Photo: The soda aisle at a Thriftway in Burien, where there is currently no soda tax. If passed, Initiative 1634 would prevent local governments from imposing taxes on sweetened beverages. (Photo: Aaron Burkhalter)