Proposition V: Taxing Sugary Drinks

This ordinance would tax sugar-sweetened beverages, syrups and powders at the point where those products were distributed to markets and restaurants in San Francisco.

This measure was placed on the ballot by supervisors Malia Cohen, Mark Farrell, Eric Mar and Scott Wiener.

Why is this on the ballot?

This is the second time San Francisco supervisors have put attempted to pass a sweetened-beverage tax. When they put a similar tax measure on the 2014 ballot it got about 56 percent of the vote, falling short of the two-thirds it needed to pass.

The authors of this measure cite the success of a similar tax in Berkeley, which has given the government a revenue source and reduced the consumption of sweetened beverages, as well as myriad health studies as pressing reasons for San Francisco to levy its own tax.

Photo by Nadia Mishkin / San Francisco Public Press

Opponents — who have labeled the measure a “grocery tax” — argue that retailers and restaurants could choose to hold down the prices of sodas and sugary drinks and simply pass this tax on to any products, affecting consumers other than those who buy sweetened beverages.

Proponents argue that health consequences connected to sugary beverages — including diabetes, obesity and cardiovascular disease — affect minorities and low-income communities disproportionately.

The federal government has recommended that people consume no more than 10 percent of their daily calories in the form of sugar that has been artificially added to food and beverages. But many sweetened beverages surpass this daily limit.

A 2012 Harvard review of various studies found that people are drinking more sugary drinks now than in previous decades, and that this consumption has been linked to increased rates of obesity, diabetes, heart disease and gout. But soda sales are also declining as consumers are purchasing more bottled water.

A 2014 report by the 35-member Organization for Economic Cooperation and Development found that 36.5 percent of Americans were obese — the highest among the member nations — and that 70 percent were overweight, second only to Mexico. In 2015, more than 29 million Americans had diabetes; the city says 7 percent of San Franciscans have been diagnosed with the disease.

The Public Press found that around 32,000 adults in San Francisco are diagnosed with diabetes, and another 126,000 are considered obese or pre-diabetic, according to various reports. In total, those diseases are estimated to cost the city almost $1 billion annually.

Proponents say that Type 2 diabetes is the fifth-leading cause of death in San Francisco, though that is an underestimate. For African Americans with Type 2 diabetes, premature-death rates are five times higher than for San Franciscans overall. Diabetes cuts eight to 10 years off an average San Franciscan’s life, proponents say.

In 2010, almost a third of San Francisco’s public school students in grades 5, 7 and 9 were either overweight or obese, according to a study authored in part by the UCLA Center for Health Policy Research. But when compared with the average rate of overweight and obese students in the 265 California cities examined by that report, San Francisco’s percentage was slightly lower.

Six years later, the same UCLA research center found that 44 percent of adults in San Francisco are estimated to have pre-diabetes and 4 percent are diagnosed with diabetes.

The authors of this proposition cite Mexico’s recent tax on sugary beverages — one peso (about 5 cents) per liter, or about 10 percent — as a success story. In the year following the tax’s creation, purchases of sugar-sweetened beverages declined by as much as 12 percent nationally, according to a study published Nov. 1. The study also predicts that just a 10 percent reduction in the consumption of sugary drinks would decrease type 2 diabetes diagnoses by roughly 189,300 cases, reduce the incidence of strokes and heart attacks by 20,400, prevent 18,900 deaths and save Mexico $983 million on health care over a decade.

What would it do and at what cost?

Proposition V would levy “a general excise tax” on distributors for “the privilege of conducting business within the City and County of San Francisco.”

The tax would create a new revenue source, boosting City Hall’s intake by $15 million per year, based on estimates from the city controller’s office. It would expire at the end of 2028.

Creating the new tax

Wholesale distributors would have to pay an additional tax of 1 cent per fluid ounce on many kinds of packaged sweet drinks sold in San Francisco retail stores. The distributors could choose to pass on this tax by raising the prices they charged retail stores, which could also pass on the tax to customers in similar fashion.

The tax would apply to beverages like sodas, soft drinks, sports drinks, energy drinks and sweetened iced teas if they contained:

  1. Added sweeteners, including sucrose, fructose, glucose, “other sugars” or high-fructose corn syrup.
  2. 25 calories or more per 12 fluid ounces.

The tax would not apply to:

  • Infant formula.
  • Beverages for medical use.
  • Meal replacements or supplements.
  • Milk products, including those made from almonds, rice and other plants and legumes.
  • Drinks containing 100 percent “natural” fruit or vegetable juice.
  • Alcoholic beverages.

Setting up an advisory committee

If passed, this proposition would also create a 16-member advisory committee to evaluate how the tax affected beverage prices, consumer behavior and public health. The committee would report its findings to the mayor and the Board of Supervisors annually; the reports might include suggestions for new programs to curb the consumption of sweetened beverages.

The panel’s membership would include representatives of nonprofit health organizations, medical institutions and city schools, a public health official, a recreation and parks employee, a parent and a youth younger than 19.

Is there a catch?

The tax revenue would go into the city’s general fund, allowing it to be used for just about anything. Critics have argued that this weakens the proposed tax’s effectiveness at improving the health of customers: higher beverage costs might discourage purchases, but the city would not be required to complement those efforts by putting this money directly into health programs.

The measure’s authors may have intentionally left the new revenue targets wide open because it would allow this proposition to be passed with only a majority vote. If the authors had required the money to be used for specific purposes, the measure would have needed a two-thirds vote, as in 2014.

Who officially proposed it?

Supervisors Malia Cohen, Scott Wiener, Eric Mar and Mark Farrell.

Who officially opposes it?

Troy Reese, the owner of Queen’s Louisiana Po Boy Cafe in San Francisco.

Vote needed to pass

Simple majority — 50 percent plus one

Effective date if passed

Jan. 1, 2018.

Follow the money

Two committees are spending money to support Proposition V: “Action New Initiative,” and “San Franciscans United to Reduce Diabetes in Children by Imposing a 1 Cent Per Ounce Tax on the Distribution of Sugary Drinks.”

One committee is spending money to oppose the measure: “No on V, Enough is Enough: Don’t Tax Our Groceries, with Major Funding by American Beverage Association California PAC.”

Follow the money at the San Francisco Ethics Commission: all Proposition V filings.

Our coverage

Big Money Already Pouring Into November Campaigns — Aug. 16, 2016
– Sara Bloomberg

Diabetes, Obesity Drain S.F. Economy Even More Than ‘Soda Tax’ Backers Proclaim — Nov. 1, 2016
– Sara Bloomberg

Study: Health, Economic Benefits Emerging From Mexico’s ‘Soda Tax’ — Nov. 1, 2016
– Sara Bloomberg

Endorsements: our methodology

The Public Press chose to count endorsements from organizations that backed multiple candidates or ballot measures, and that made those endorsements available online. We did not count endorsements from individuals.

If you think we missed an important organization, please tell us. We’d love to hear from you.

Tracked endorsements by organization

Written by: Noah Arroyo, Sara Bloomberg and Zachary Clark

Published: Sept. 30, 2016

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