Sugar Tax – a sweet – or raw deal – for Seattle?
By Lindsay Peyton
There’s a long list of businesses in Seattle that are banding together in opposition to the City’s new Sugar Tax.
“Keep Seattle Livable for All” coalition members on the west side include Hawk’s Nest West, Freshy’s, El Chapulin Oaxaqueno, Perk Up, Super 24, Gas Co, Blue Moon Burger, Cowgirls Espresso, the Daily Dose, Shell, Wanna Teriyaki and Burger, West Seattle Smoke Shop, Admiral Bird, South Park Food Mart, Bird on a Wire, Toshi’s Teriyaki, Vatsana’s, Pizza Mart, the Swinery, Young’s Restaurant and the Westy Sports and Spirits.
Also on board are Dutchboy Coffee, Delridge Deli, Iraisha Sushi, Chevron, Realfine Coffee, Lincoln Food Market, Lee’s Produce, Ampersand, Sub Shop, Tummy Yummy Thai, Pearls, Be’s Restaurant, Alki Beach Pub, India Bistro and the Lockspot Café – just to name a few.
It’s only been a couple of weeks since the prices of sodas, teas and juices have gone up in Seattle – as the result of the city council’s vote in favor of the sweetened drink tax – and restaurants and stores are still figuring out how to respond.
“Some products will more than double in price,” the group’s spokesman, Jim Desler said. “These price increases are quite significant.”
The measure went into effect on Jan. 1.
Distributors now must pay 1.75 cents per fluid ounce of sweetened drink. The tax affects non-alcoholic beverages, syrups or concentrates that list any form of sugar-based sweetener, including sucrose, glucose, dextrose, fructose, monosaccharides, disaccharides, corn syrup and honey.
For example, Desler said a gallon of sweetened tea would increase by $2.24, while a 12-pack of 12-ounce soft drinks would go up by $2.52.
“Everyone assumes that it’s just soda, but it’s energy drinks and juice boxes as well,” he said. “Some prices will rise by 50 percent or more.”
One member of the Keep Seattle Liable for All coalition is Navdeep Gill, the owner of 7-Eleven in White Center.
His store is on the border of Seattle and unincorporated King County – so customers can simply shop on the other side of city limits to avoid the tax.
“My customers have the opportunity to get the same product a mile from my store and save a dollar,” he said.
Gill said that as a small shop, he could not absorb the additional costs without passing it on to customers.
“There is no way,” he said. “My profit margin is not high enough.”
He explained that for a 20-ounce drink, his profit is usually 50 cents. The tax alone would be 32 cents. If he did not increase the cost of the soda on the shelf, his profit would drop to 18 cents.
Gill said that the tax places an unfair burden on those who can least afford it. “You should get money from more affluent people,” he said. “Poorer people are more inclined to drink soda. It’s taxing the poor.”
Gill said that he attended a couple of city council meetings to voice his opposition to the tax.
“But they had their minds set,” he said. “The public meeting was just a formality. We were never heard.”
Gill hopes that area residents will protest the tax – and eventually force it to go to a vote.
Desler also wants to see the tax repealed. “The city council passed this without much fanfare,” he said. “People didn’t know it was coming. It wasn’t something put up to a vote.”
He explained that the coalition started a campaign to raise public awareness of the tax.
“We want to make people aware of what’s going on – and give them a vehicle to voice their opinion,” he said.
The coalition started a phone line -- 1-800-397-3446 – for area residents who want to voice their opposition to the tax to city council.
“Call us – and we’ll pass along the information to the mayor,” Desler said. “We feel that the beverage tax will cause much more harm than the city has let on. It hurts business owners, it hurts people who live paycheck to paycheck. It hurts those who have it the hardest.”
He believes the sugar tax is part of a broader issue. “Seattle is becoming more expensive,” he said. “People are finding it more and more difficult to remain here.”
But making consumers frustrated when they reach for a soda or sweetened juice is part of the point of the tax. It was designed with changing habits in mind.
The tax is billed as an obstacle to drinking high calorie drinks – and therefore part of a path to healthier residents, with fewer instances of diabetes and obesity.
According to the City, consumption of sweetened beverages is anticipated to drop over time.
In addition, funding from the program will support educational programs, as well as Fresh Bucks, which provides a dollar-for-dollar match on food stamp purchases at participating farmers markets to spend on fresh fruits and vegetables.
Council member Teresa Mosqueda, chair of committee charged with overseeing public health matters, said she supported the tax on distribution companies, seeing it as an investment in food access, early learning and education programs.
“This policy shows that we value investing in workers, and the health of our population, while diversifying revenue streams – not relying solely on regressive property and sales taxes,” she said. “This tax will both promote healthier beverage choices and raise revenue to expand opportunities and access to healthy food for those very communities most affected by the diabetes and obesity epidemics.”
Mosqueda said that the state saw positive results when tobacco taxes increased.
“By increasing the cost of unhealthy options, companies have an opportunity to provide healthier options at lower cost to communities throughout Seattle,” she said. “Too many families, especially low-income and families of color, face significant barriers to accessing healthy food, live in food deserts and disproportionately work in low wage jobs.”
Mosqueda said that corporations may choose to not pass on the cost of the tax to the consumers.
“Individual stores and retailers can choose to pass along some of the cost to the consumer, all of it, or none at all,” she said.
The City’s ordinance provides measures to protect smaller manufacturers. If a manufacturer has a worldwide gross income of more than $2 million but less than $5 million in the prior year, the tax rate is reduced to 1cent per fluid ounce.
If a manufacturer has a worldwide gross income of $2 million or less in the prior year, no tax is assessed.
The businesses must apply for an exemption certification according to rules established by the City.
Council member Lisa Herbold voted in opposition of the tax. She explained in her blog that she had several concerns about how to spend the projected revenue and the tax itself.
“This kind of tax will always be a regressive tax, meaning that the tax burden of this kind of tax will always be greatest on those with lower incomes,” she wrote. “Unfortunately, the bill that came out of committee isn’t only regressive, I feel that it is punitive to low income people and small businesses.”
Herbold said that the tax goes beyond the type of levy imposed on cigarettes, alcohol, and cannabis. She included a diagram showing that the tax on total price will be 47.26 percent for a 5-gallon syrup and 39.79 percent for a 2-liter cola.
A carton of cigarettes is 38.97 percent, a gram of cannabis is 37 percent and a bottle of liquor is 32.8 percent.
Herbold continues in her blog to point out that the tax “has a racially disparate impact on people of color.”
“The Mayor and Council’s Racial Equity Toolkit (RET) analysis of the tax proposed only on sugary drinks and not diet drinks concluded that, ‘In contrast to these trends for sugary drinks, Whites and high-income Americans are more likely to drink diet soda compared to communities of color and low-income Americans,’” Herbold wrote.
Herbold proposed including diet beverages in the tax to make it more equitable, but her motion failed. She also recommended reducing the tax to 1 cent per fl. oz, which also did not pass.
Herbold did pass an amendment to prioritize funding to programs that close the food security gap.
“I share the concern that I’ve heard from many about the impacts of this tax on small business and low income individuals,” Herbold wrote in an email interview.
She explained that the Sweetened Beverage Tax Community Advisory Board, together with the City Auditor, will oversee an annual report on the impact of the tax on beverage prices, consumer behavior, sweetened beverage sales and health outcomes, as well as economic impacts.
“The evaluation shall also assess perceptions of the tax from city residents and specifically low income households and food retailers,” she said.