California would ban its cities and counties from creating taxes on soda and other sugary drinks for more than a decade if the Legislature approves a budget trailer bill introduced Sunday.
The language, which is still being finalized, is part of a developing deal between organized labor and business groups to remove from the November ballot a proposed measure that would make it harder to raise state and local taxes. Senate Bill 872 prohibits new local taxes on "groceries," such as "carbonated and noncarbonated nonalcoholic beverages," through the end of 2030, including any that may pass this year.
The Service Employees International Union California has been leading cities and other public employee unions in a campaign against the initiative, which they argue would devastate local governments still recovering from the economic recession by undermining their ability to find new sources of revenue to balance their budgets.
"Keeping this costly initiative off the ballot would be good news for communities across the state who count on crucial local services including fire and public safety, libraries, parks and infrastructure that were threatened with hundreds of millions of dollars in devastating cuts," Mike Roth, a spokesman for the opposition, said in a statement. "We will continue to pursue this objective while we are in discussions with the legislature this week."
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The initiative, which faces a Thursday deadline to officially qualify or be pulled from the November ballot, raises the threshold for passing any new tax or tax increase to two-thirds of voters or an elected body. Under California law, local taxes that contribute to general funding can win with a simple majority vote. The measure would also require that any charge created by a regulatory agency come back to the Legislature for final approval.
Soda companies like Coca-Cola, Pepsi and Dr Pepper have been the primary donors to the effort so far, funding a political action committee run by the American Beverage Association that has contributed more than $7 million as proponents gathered signatures to qualify the initiative. They are facing a growing wave of public health-driven taxes in cities across California, and the country, that appear to be hobbling sales.
A moratorium on new taxes would be a huge financial boon to the beverage industry, which wields tremendous influence at the Capitol and has blocked bills to create statewide soda taxes for years.
Consumption of soda and other sugary drinks has dropped by more than a fifth in low-income Berkeley neighborhoods since it became the first city nationwide to pass a local soda tax in 2014. The beverage industry spent more than $30 million in 2016 to unsuccessfully fight similar measures in San Francisco and Oakland. Those existing taxes would not be affected by SB 872.
Supporters contend the initiative makes necessary changes after several recent court decisions weakened previous voter-approved initiatives to protect taxpayers. Rob Lapsley, president of the California Business Roundtable, which proposed the ballot measure, has said business groups are prepared to spend tens of millions of dollars on a campaign.
"There are last-minute discussions in the Legislature in an attempt to address the many issues that brought us to introduce the Taxpayer Protection Act, including increasing government transparency and accountability over new tax revenue while addressing new and higher taxes that disproportionately affect those who can least afford it," Lapsley said in a statement. "We are tracking these discussions closely and remain committed to working on solutions to our high tax and high cost of living issues that impact our future job growth."