After efforts in several cities to tax or limit the consumption of sweetened carbonated beverages, opponents of sodas have managed to pass a tax on sodas in the city of Berkeley, California. Tax attorney Rob Wood discusses the tax in this report and in his Forbes article “Death To The Soda Tax, Long Live The Soda Tax.”
The impetus for taxing or otherwise limiting the consumption of sodas by Americans relates to the high sugar content of these drinks and the obesity problem in America. Wood says that taxes like this, often called “sin” taxes, are really excise taxes—the charge is per ounce or per unit.
Wood says that there was a bitter and hard-fought campaign to pass the tax in Berkeley. There was a similar effort in San Francisco, across the bay from Berkeley. The soda industry spent large sums of money opposing these taxes, apparently spending more in San Francisco. The tax failed in San Francisco. Wood notes that Berkeley is a smaller city and “historically very liberal.”
Wood opines that it is too early to count the tax in Berkeley as “the first domino falling.” But the tax has been a long time coming. Limiting soda consumption was tried in New York City, where Mayor Michael Bloomberg’s plan to keep large sugary drinks out of eating places was thrown out by the New York Court of Appeals. The effort was popularly referred to as the “big gulp ban.”
Wood says that there are still a lot of lines to be drawn in the regulation of sugary drinks. There are many beverages that are high in sugar content, even though they are not classified as sodas—orange juice is one example. Litigation may be triggered by future decisions about what is covered by the tax and what is not.
Another issue to be decided is what to do with the tax revenues. Cigarette excise taxes have been earmarked for a variety of purposes related to health and smoking prevention. Wood thinks that, in the long run, taxes like this will be earmarked, even though that does not mean the money will be spent productively. It also does not necessarily mean that consumption will be reduced.
As Wood says, the many ads consumers saw on television during the run-up to the soda tax election were probably confusing to anyone trying to make a reasoned decision.
For more information on the subject, please refer to Mr. Wood’s article in Forbes. Robert Wood is a tax attorney with Wood, LLP in San Francisco, California and spoke with The Tax Law Channel, an affiliate of The Legal Broadcast Network. The Legal Broadcast Network is a featured network of the Sequence Media Group.