Campaigns on Oakland’s Measure HH spar over “soda” vs. “grocery” tax

Health officials call it a “soda tax” that will fund health initiatives in Oakland while attempting to curb high rates of obesity, type 2 diabetes, tooth decay, heart disease and other chronic conditions linked to excessive sugar consumption.

But others—funded by sugary beverage makers—are calling it a regressive “grocery tax” that would force small businesses to raise prices, accelerating the rising cost of living in Oakland.

While a soda tax by another name may not sound as sweet, there’s no denying the battle surrounding Measure HH relies heavily on semantics.

In November, voters will decide on Measure HH, placed on the ballot by the Oakland City Council. If passed, Measure HH would create the “Chapter 4.52 – Sugar-Sweetened Beverage Distribution Tax Ordinance,” a one-cent-per-ounce excise tax on distributors of sugar-sweetened beverages that would take effect July 1, 2017.

The tax would be paid by distributors of the beverage—not the consumer—as city and county governments cannot increase sales taxes on beverages. The measure doesn’t dictate that the added taxes be passed on to soda shoppers. Unlike other “sin taxes” on tobacco products or alcohol, it would be up to each distributor how to handle the cost.

The passage of Measure HH would make Oakland the second Bay Area city with such a tax. Berkeley passed a similar measure in 2014, while other cities—such as Richmond, El Cerrito, and San Francisco—had the measures fail at their ballot boxes. Two other cities—San Francisco (Proposition V), and Albany (Measure 01)—will vote on similar measures this year.

Those in favor of Measure HH call themselves “Oakland vs. Big Soda,” but are officially known as the “Coalition for Healthy Oakland Children with major funding from Michael Bloomberg and Action Now Initiative.” The campaign against is officially the “No Oakland Grocery Tax, with Major Funding by American Beverage Association PAC,” but simply call themselves “No Oakland Grocery Tax. No on HH.”

Supporters of the tax argue that it’s truly a tax on soda, just as the name implies.

“This is a tax on distributors of sugar-sweetened beverages,” said Diane Woloshin, director of the Coalition for Healthy Oakland Children and a former health care program administrator for the Alameda Public Health Department.

Under the ordinance, beverages—excluding baby formula, medical beverages, meal supplements, milk products from plants or animals, alcohol, or juices without added sweeteners—containing added “sucrose, fructose, glucose, other sugars, and high fructose corn syrup” would be subject to the tax.

For example, a distributor selling a 20-ounce soda would have to pay $0.20 in extra taxes on the sale. Diet sodas containing none of those sweeteners would be among those exempt from the taxes, along with beverages sold by distributors who do not exceed $100,000 in annual gross receipts.

But Joe Arellano, an independent consultant and spokesman for campaigns opposing sugary beverages this election in Oakland, San Francisco and Albany, said “plain and simple, it’s a grocery tax.”

The measure, he said, will affect “mom and pop” grocery stores who would have to raise the prices on all their products, not just sugar-sweetened beverages, to make up for the tax. “Anyone who has taken an economics class knows that when you impose a new fee you have to make up that tax somehow,” Arellano said. “If you have a new cost, you have to make up that cost.”

It’s also the core of the messaging appearing in the mailings and other advertisements in English, Spanish, and Chinese from the No on HH camp. “Sack the Grocery Tax. No on HH” posters hang in the windows of some Oakland small groceries, some of whose owners have appeared in advertisements.

An email to the No on HH subscriber list featured Letosha Scott, the store manager of La’Christa Café on Telegraph Avenue in Downtown Oakland. “Let’s be clear: Measure HH is a tax on food and groceries. It will hurt low-income and working families the most,” the email said. “If you do the research, you can clearly see grocers and restaurant owners cannot afford this tax.”

On August 31, attorneys from the San Rafael law firm Nielsen, Merksamer, Parrinello, Gross, & Leoni filed a petition in Alameda County Superior Court on behalf of an Oakland restaurant owner, Isabella “Ma Bella” Coffey, contesting the wording on the November ballot by arguing Measure HH contained “false and misleading statements” relating to its negative financial impact on small businesses. They argued grocers would ultimately pay the tax.

“Measure HH is merely the latest attempt by a municipality in California to generate revenue by proposing a tax on sellers of sugar-sweetened beverages,” their petition to the court states.

On September 2, Alameda County Superior Court Commissioner Thomas Rasch ruled the wording can stand as it is written. The wording on the ballot—“the tax is not paid by your local grocer” —“is not false,” he ruled.

Oakland city council member Rebecca Kaplan (at-large), one of three councilmembers who proposed the ballot measure, which was unanimously approved by the rest of council, said the ruling confirms that Measure HH is about sugar-sweetened beverages, not groceries.

“I think it is great news that we prevailed in the ridiculous lawsuit from the soda industry, and I think that result just shows the truth we’ve been saying all along,” she said.

Holly Scheider led the Berkeley Healthy Child Coalition, which campaigned for their city’s tax, and now leads the pro-tax campaign in Albany. She said the soda industry spends large amounts of money against these kinds of taxes by pitting one side of a community against one another.

“The main thing they’re doing is raising doubt it’s a sugary drink tax,” Scheider said. “They [the American Beverage Association] lie and don’t care because they want a job.”

Campaign disclosure forms show the No on HH campaign attorneys are paid with funds from the American Beverage Association (ABA), a trade group that represents Coca-Cola, Dr. Pepper Snapple, Pepsi, Red Bull North America, Sunny Delight, Tampico, and other popular non-alcoholic beverages filling the coolers of corner stores, markets and grocery stores across the nation. The association disclosed spending $600,000 of the $747,267 spent by the No on HH campaign, according to its records from the first six months of the year.

Neither Elli Abdoli, No on HH’s campaign attorney, nor Coffey responded to a request for comment. A spokesperson for the ABA referred questions to Arellano.

Despite Rasch’s ruling, Arellano argues local grocers will have to pass the tax onto consumers.

When asked why the ABA—which has successfully helped defeat all but two taxes on sugar sweetened beverages by spending millions of dollars to oppose them— is funding the battle against the tax, instead of a grocery group like the National Grocer’s Association, Arellano said, “It’s being sold as a tax on soda.”

In 2014, Berkeley became the first U.S. city to pass a per-ounce tax on sugar-sweetened beverages. The ABA paid more than $2.4 million to campaign against the measure, according to a report from the Center for Science in the Public Interest.

Oakland and other California cities have mimicked Berkeley’s model, specifying that the taxes would be deposited into the city’s general fund. This allows the measure to be passed with 50-percent-plus-one vote, instead of the two-thirds vote required to pass a tax that would earmark the funds.

Like Berkeley, Oakland’s tax revenue would be overseen by a special committee, which includes, among others, appointees from the medical community, the Oakland Unified School District, and neighborhoods most affected by the negative health effects of regular soda consumption.

In June, Berkeley’s Sugar-Sweetened Beverage Product Panel of Experts Commission allocated $637,500 of the more than $2 million generated from the tax so far to the Ecology Center, Healthy Black Families, Berkeley Youth Alternatives, and two YMCA programs focused on reducing obesity and diabetes.

Measure HH would curb people from buying sodas, while the taxes gleaned from those who do drink them would help fund much-needed health programs in Oakland, Woloshin said.

“Berkeley’s model is working. We think we took the best of the Berkeley model and added what was needed in Oakland,” she said. “It’s really about the health of Oakland children.”

Health officials are calling Berkeley’s tax a win because it resulted in a 21 percent drop in consumers buying sugar-sweetened beverages in Berkeley, while cities without the tax saw an increase in consumption, according to a study published last month in the Journal of American Public Health.

Dr. Jen Falbe, a postdoctoral research fellow at UC Berkeley’s School of Public Health and the lead author on the study, and her team came to that conclusion by interviewing shoppers outside corner stores in lower-income, ethnically diverse neighborhoods in East and North Oakland, San Francisco, and Berkeley before and after Berkeley’s tax went into effect. Overall, Falbe said it made shoppers think twice about buying a sugary beverage, resulting in a 63-percent increase in water consumption.

“Minority and low-income populations really bear the brunt of diabetes, heart disease, obesity, these health consequences that are linked to sugary drink intake,” she said. “Lower income people might be more price sensitive. Kids, teens and adolescents have even lower amounts of money to spend on food and beverages.”

Falbe is currently researching how stores and grocers have made up for the soda tax in Berkeley. As of late August, of the 19 interviews her research team had done with small and large businesses, none reported passing on the added costs to non-beverage items, she said.

“Most reported raising the prices of beverages only,” she said. “Some did say they were eating the costs.”

Both sides of the campaign are spending big money to argue for whether Measure HH is truly a “soda” or a “grocery” tax.

Arellano said the anti-tax campaign has $9.5 million in TV ad time reserved with Bay Area television stations.

Michael Bloomberg, media billionaire and the former New York mayor who attempted to limit soda sizes, disclosed Thursday that he has contributed $348,155 to fund the pro-tax side. The Action Now Initiative, a nonprofit organization funded by former Enron billionaire John Arnold and his wife, Laura, which supports the tax, have yet to disclose their contributions.

The Coalition for Healthy Oakland Children disclosed spending $23,297 on their campaign up to June 30.

[This story has been updated to correct an error regarding the unit of measure taxed by Measure HH. It is one-cent-per-ounce]