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California soda tax bill shelved, in reprieve for beverage industry

Key Points
  • A bill that would have slapped a statewide tax on sugary drinks in California stalls when the lawmaker who authored it shelves the legislation until next year.
  • The measure would have imposed a tax of 2 cents per fluid ounce on soda and other sugar-sweetened beverages such as teas, and sports and energy drinks.
  • The bill seeks to use the tax revenue to help fund programs to combat diabetes and other chronic health conditions.
A customer shops as bottles of Coca-Cola Co. brand soda sit on display for sale.
Christopher Lee | Bloomberg | Getty Images

LOS ANGELES — A bill that would have slapped a statewide tax on sugary drinks in California stalled Monday when the lawmaker who authored it shelved the legislation until next year.

Assembly Bill 138 would have imposed a tax of 2 cents per fluid ounce on soda and other sugar-sweetened beverages such as teas, and sports and energy drinks. It seeks to use the tax revenue to help fund programs to combat diabetes and other chronic health conditions.

AB 138 is opposed by the beverage industry as well as grocer groups and the California Chamber of Commerce. The Howard Jarvis Taxpayers Association, which opposes the bill, estimated the tax could generate more than $3 billion in new costs for Californians.

However, the measure is supported by a coalition of organizations, including the California Medical Association, California Dental Association, and American Academy of Pediatrics.

According to the author of AB 138, Assemblyman Richard Bloom, the proposed soda tax measure will remain in the Assembly Revenue & Taxation Committee over the remainder of this legislative year and will move forward through the legislative process next year. The bill's language claims there's a link between the consumption of sweetened beverages and diabetes, obesity and heart disease.

"While this is not the outcome I had hoped for, AB 138 remains alive in the legislative process, albeit on a slower track," said Bloom, a Democrat. This marks the third attempt by the lawmaker to pass a soda tax, including a "health impact fee" measure on canned soda drinks that legislators voted down last year.

Similarly, the beverage industry also opposed Assembly Bill 766, a measure to ban the sale of jumbo-sized sugary sodas, including 7-Eleven's Big Gulps. AB 766 was pulled earlier this month from consideration and isn't expected to be heard during this session.

The beverage industry and its lobbyists have spent nearly $12 million in the last two years in California fighting proposed soda taxes or health warnings, the Los Angeles Times reported earlier this month. The shelving of the proposed tax is seen as a victory for major soda companies such as Coca-Cola and PepsiCo.

Besides taxing soda containers at a rate of 2 cents per ounce, the bill also would add a fee on syrups sold for sugary drinks. A report from the state's Legislative Analyst Office concluded "a two cent per ounce tax likely would reduce consumption by 15% to 35%. "

"We are glad the Legislature delayed action because California voters oppose a beverage tax which would be an unfair burden on working families, neighborhood businesses and employees already struggling with the state's high cost of living," said Steven Maviglio, a spokesman for the American Beverage Association. "We remain committed to working with the Legislature on effective ways to address its budgetary and public health concerns and to ensure that food and beverages remain affordable to all Californians."

Some have suggested that state legislators may be wary of passing new taxes due to a political firestorm created after the 2017 passage of a gasoline tax increase. Orange County voters in June recalled a Democratic lawmaker from his state Senate seat. Sen. Josh Newman, whose seat was taken by a Republican, had been linked to a $52 billion transportation package, which included a 40% increase in the state's excise gas tax as well as increased vehicle fees.

"This delay is unfortunate because, with the health outcomes of millions of Californians at stake, there is no time to lose," said Bloom. "On the other hand, we will now have the time to build an even bigger and stronger coalition of supporters."