Why California’s Soda Tax Matters to New York
By now, our readers should be quite familiar with the basic concept, purpose and distribution of soda taxes. As we’ve discussed, soda taxes are a specific example of sin taxes. As we’ve discussed, sin taxes are designed to both deter harmful consumption and also fill the coffers of state treasuries. State and local governments throughout the country have introduced soda taxes. They’ve often done so to make up for the added healthcare costs associated with soda consumption. Of course, increasing revenue is always another goal.
The “sugary drink tax” recently passed in Seattle deserves our attention. It stands as one good example of a city government imposing a tax to boost its reserves for public causes. Among sin taxes, a tax on sugary drinks is among the most common. It now stands alongside the very familiar taxes on liquor and tobacco products. This is not without good reason: consuming sugary drinks on a regular basis contributes toward obesity and other health problems.
One of the most significant news stories relating to taxes on soda is the recent bill passed by in California. That law banned new soda taxes from being implemented by California municipal governments until 2031. For a state well-known for its internal financial worries, such a bill may appear strange upon first glance. The full story, however, is quite fascinating and may even improve California’s budgetary problems. In this post, we’ll take a look at precisely what happened leading up to the passage of this controversial new law.
California Assembly Bill 1838
In June, Governor Jerry Brown signed Assembly Bill 1838. The bill prohibits local governments within California from taxing soda until the 2031. Importantly, the bill allowed existing sugary beverage taxes to stand untouched. As a result, municipalities in the state that already have such taxes will be able to retain them. Two California cities, San Francisco and Oakland, are among the California cities which already tax sugary beverages. The new law already ranks among the more controversial pieces of California legislation, for multiple reasons. For one, an extra tax on sugary drinks would provide much needed revenue. Revenue, in fact, for all sorts of important public causes, including education and aid for the homeless. The role of the beverage industry in the development of the legislation also leads to questions about its propriety.
As it turns out, perhaps the most significant force behind the passage of this new legislation was the pressure applied by the sugary drink industry. That includes both the American Beverage Association and major beverage corporations, such as PepsiCo and Coca-Cola. Each of these entities have substantial financial interests to protect. So it’s no surprise that they would work to prevent implementation of more local taxes on sugary beverages.
But why was such pressure successful in this case? The answer is a bit depressing. The entities all supported a ballot initiative requiring that any new California local taxes have super majority support behind them. No longer would simple majorities suffice. Passage of the measure would’ve made it extremely difficult for local governments to impose new taxes of any kind. Viewed in that light, Assembly Bill 1838 is a compromise between the State and the beverage industry.
California as a Trend-Setter
What kind of wider impact can we expect this recent legislation in California to have? As we’ve noted, wherever California goes, the rest of the nation tends to follow. New Yorkers would do well to heed what’s happening in the Golden State otherwise. If not, we may wake up with a rude surprise in the future. It’s certainly not unthinkable that we’ll start to see other states ban soda taxes in coming years.
The real lesson is that we need to keep an eye on the behavior of big business. As we see here, without the pressure applied by beverage industry leaders, this new legislation almost certainly wouldn’t have succeeded. Governor Jerry Brown’s well-known stance on health-related issues would have otherwise prevented it. It now seems that other state governments should be mindful of the increasingly organized beverage industry’s political efforts.
Why California’s Soda Tax Ban Matters
Among other things, California’s experience demonstrates both the sheer power and economic leverage that major industry players wield in the political world. We often prefer to think that tax laws here in New York are free from outside pressure or influence. The California soda tax ban clearly shows that this thinking is not correct.
The NYC tax lawyers at Mackay, Caswell & Callahan, P.C. keep up-to-date on both taxation and and finance. We want to ensure that we deliver the best possible service to our clients. We know that tax law is a maddeningly complicated field. That’s precisely why our professionals work diligently to translate it into easily understandable terms. Many of our clients are business owners. Being aware of tax developments in other states, can assist our New York tax clients with local tax issues. If you have either a business law or tax issue, please reach out to one of our top New York tax attorneys today. With New York offices in cities including Albany, New York City, Rochester and Syracuse, a New York tax attorney can get started on your issue in double quick time!
Image credit: Alexander Kaiser
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