Off the Table?: How the Soda Industry Made Sure It Wasn’t Taxed
“Tobacco is hard,” says Vic Colman, staff for Washington state’s Childhood Obesity Prevention Coalition, an umbrella group for 40 organizations under the fiscal sponsorship of the Children’s Alliance. “This is harder.”
Colman should know. For nearly a decade, he worked in the state’s Department of Health on issues of tobacco prevention and control, including implementing Initiative 901, the initiative that prohibits smoking in public places. Now he’s the head of a coalition that for the last few years has been pushing to reduce consumption of junk food as part of a broader campaign to address America’s obesity epidemic.
“You can demonize tobacco,” says Colman. “That’s not something that going to fly on the food issue… because it’s something people need to survive.”
This year, as part of his work, Colman was the lead lobbyist in Olympia on behalf of an excise tax proposed by the Governor on soda pop, energy drinks, and other “sugar sweetened beverages.” The proposal, which would have put a 5 cents per 12 ounce tax on soft drinks, and repealed a tax break for soda syrup, offered a number of benefits, according to Colman: “you raise money, you shift behavior, and if you can then also dedicate the money to public health you have a three for [one].”
The soda taxes were part of a cluster of so-called “sin taxes” proposed by the Governor at the beginning of the legislative session— taxes that are supposed to reduce consumption of harmful products as well as increase revenue for services such as health care which can mitigate the products’ social costs. Numerous studies over the last year in particular have documented the significant role that soda consumption plays in obesity— including the New England Journal of Medicine and the UCLA Center for Health Policy. The Archives of Internal Medicine also released a report on March 8, 2010 arguing that increasing the price of unhealthy foods discourages unhealthy consumer behavior in ways that improve public health.
Because of the popularity of soft drinks, the Governor’s tax proposal is also potentially very lucrative. Depending on how it’s levied, proponents claim it could raise between $100 and $300 million per biennium. That’s roughly equivalent to the amount of money that the Senate and the House are currently fighting over whether to raise the general sales tax.
But the soda tax isn’t on either the House or the Senate’s agenda (at least not publicly), even though the tax was proposed to the Legislature by the Governor, and introduced as part of a tax package in the House. Proposals to raise special taxes on tobacco, candy, gum, and bottled water live on in public debates. But the soda tax—unlike the other sin taxes proposed by the Governor— has dropped off the map.
What happened? Industry lobbyists went to work. In private conversations, they instilled fear in legislators that the soft drink industry would do whatever it took to repeal the tax and throw any budget that banked on such a tax into chaos. So instead of getting a hearing, receiving an up or down vote, or making it into either the House or the Senate’s budgets, the tax proposal died a quiet death without any public explanation or news coverage.
“The concern is that the soda industry would put a lot of money into repealing the tax as they did in Maine” in 2008, says Representative Eileen Cody (D-Seattle), Chair of the House Healthcare and Wellness committee, who introduced the soda tax legislation to the House as part of a cluster of sin taxes proposed by the Governor.
Cody identified David Michener, lobbyist for the Washington Soft Drink Association, the state chapter of the American Beverage Association, as the lead person who communicated this message to legislators. (Michener did not return the Newswire’s call for this story). A large majority of the Soft Drink Association’s revenue comes from Pepsi and Coke’s Northwest bottling and business units.
According to the Governor’s office, the Governor met with representatives of the soda industry on March 3, 2010, including David Michener, Tim Martin from Harbor Pacific Bottling Company, Bob Flack from Coca Cola, Brad Boswell from David Michener & Co., Heidi Piper Schultz from Corwin Beverage, and Rick Olmquist. The Vancouver Business Journal did a story on Schultz, who is a member of the Washington Soft Drink Association, and her opposition to the soda tax, as a prelude to their meeting with the Governor.
Who in the legislature soda industry lobbyists have met with this year is unclear. But the effect of those meetings is clear enough.
After talking with Michener and maybe others, Democratic legislators were less concerned with whether they would win a battle with the industry, according to Cody, than whether they wanted to rely upon revenue that would then be contingent upon a vote at the ballot. “They’ve been very clear that if we do it, they would put it on the ballot. They spent something like $3 million in Maine… If you spend enough money you can talk people into a lot of things. We don’t want to have a big fight on the ballot with whatever tax package we come up with.”
Rep. Ruth Kagi agreed. “We want to develop a revenue package that will be sustained,” she said. “It was really scary to watch Oregon because they passed the corporate income tax and personal income tax and it went to the ballot. If the voters had not approved those, Oregon would have been in a world of hurt.”
But the legislature’s wariness of taking on the soda industry was about more than the lobbying done in 2010. In some ways, the industry has been lobbying against the soda tax for over 20 years. Washington state is one of 33 states in the country that have a sales tax on soda pop (others treat it as “food” that goes untaxed). Attempts to keep that tax from being expanded have kept the industry mobilized for decades.
In 1989, the legislature extended the business and occupation (B&O) tax to include syrup used in soda. It also passed House Bill 1793, which funded war on drugs programs with special taxes on beer, wine, alcohol, cigarettes, and one cent per 12 ounce can of soda pop. The soda tax was slipped into the bill without a hearing, catching industry lobbyists off guard. According to a contemporary report by the Associated Press, the industry objected that soda was food and not a drug, and complained of “taxation without representation.” But the Legislature didn’t care. House Majority Leader Brian Ebersole (D-Olympia) reportedly quipped without sympathy that “we tax cigarettes to pay to clean up the Puget Sound. It’s about as fair as that.” Coke and Pepsi demanded that Governor Booth Gardner veto it, but he refused.
The special tax on soda expired in 1995, the same year that anti-tax Republicans elected as part of a wave of electoral discontent in 1994 took office. One year later, Initiative 601’s requirement that tax increases be approved by a 2/3 majority effectively blocked further attempts to reinstate the tax. Governor Gary Locke proposed reviving the tax in 2000, but Republicans had sufficient power in the Legislature to make the proposal a non-starter, and looming election-year debates over taxes didn’t help his cause.
In her first year in office, Governor Christine Gregoire proposed a 2005-7 biennium budget that included a special tax on soda, but the Legislature did not act on it. And in 2006, the soda industry teamed up with the restaurant industry to successfully repeal the other soda tax from 1989—the B&O tax on soda syrup—a $15 million per year tax break.
The political relationships developed by the soda industry over the last few decades run deep, and they’ve made sure to donate to nearly half of all state legislators in the last two years.
The push for the soda industry tax break in 2006 (SB 6533) was led by the state Senate. Four of the five Senators who sponsored it were Republicans. The other was Sen. Margarita Prentice (D-Seattle), the powerful Chair of the Senate’s Ways and Means Committee who is one of three senators on the Senate’s committee that is currently in negotiation with the House on raising taxes.
Indeed, the Washington Soft Drink Association has donated money to four out of the five people in both chambers engaged in negotiations over how to raise revenue. On just one day in 2008 alone, the Washington Soft Drink Association donated the maximum amount allowed by the law, $1600, to 39 legislators— including Senate Majority Leader Lisa Brown (D-Spokane) and Speaker of the House Frank Chopp (D-Seattle)— and donated $900 or a little less to about 30 others. It donated money to Ed Murray (D-Seattle), Chair of the Senate Democratic caucus, in 2009 and 2006. It also made a $1600 donation to Ross Hunter (D-Medina), the Chair of the House Finance Committee who took the lead for the House on closing corporate tax loopholes, in November, 2009, and has donated to Hunter every single year since he was elected in 2002.
As recently reported by the Newswire, Prentice, Chopp, Brown, Murray, Hunter and Sen. Rodney Tom (D-Medina) are reportedly in charge of negotiating how the state will raise $800 million in taxes this year as part of their attempt to close a $2.8 billion budget deficit. According to the state’s Public Disclosure Commission, the only member of that group the Soft Drink Association hasn’t donated to is Tom.
In all fairness, the sheer number of campaign contributions that the Association hands out means that some of the people who receive money from it still want to enact a special tax on soda. This includes Representative Cody herself, who received $1600 from the soda industry as part of its May, 2008 donation blitz, and also received a donation from the industry in 2006.
But regardless of the impact of specific donations, the real issue is relationships, says Vic Colman. “It’s not like they just showed up this year,” he says. “There was a long history of the soda pop tax and corollary syrup tax caught up in the candy and gum wars of the late 1980s— promises made, promises not kept. The syrup tax bill that came in a couple years ago brought out that whole history to me. They were supposed to get a short term tax in the late 80s and that tax stuck around. It’s a cautionary tale of the power of these lobbying groups and how far back their memories go and their links to legislators from 20 years ago.”
The soda tax could still return this session— reinserted into a compromise budget between the House and the Senate as an alternative to other taxes, especially if the chambers are struggling to find an alternative to a sales tax increase. Whether it’s a tax that’s included in the proposal the Governor made this week for raising $800 million without raising the sales tax is unclear. Either way, some legislators and liberal lobbyists still hold out hope that this will happen, though they admit that it would be a long shot.
As Jon Gould, Deputy Director of the Children’s Alliance, put it, “It’s always possible that legislators are going to grab a smart policy solution and put it into the mix. The fact that it’s in the 11th hour makes it a challenge.”
“It’s not totally off the table,” says Cody. “It’s still one that a lot of us like… I don’t know if the budget negotiators are talking about it. But there are legislators amongst us who are still talking about it.”
[Editor's Note: Since this story was written, the Washington state legislature adopted a 2 cent per 12oz tax on sugar sweetened beverages that will last from 2010-12 unless repealed. The tax was inserted without a hearing during the legislature's special session in April, 2010 and signed by the Governor. For analysis of this story's significance to national debates, see "How Soft Drink Lobby's Victory in WA Matters..." For national context, see the Stateline.org article, "Some States Like the Sweet Taste of Soda and Candy Taxes."]
