Big Soda is taking on small government in California, as the American Beverage Association (ABA) sues the city of Santa Cruz over its tax on sugar-sweetened beverages.
The lawsuit, filed last Thursday in the California Superior Court of Sacramento County, challenges Measure Z, a local statute passed in November’s election that calls for a two cents-per-ounce tax on “sugar-sweetened beverages (e.g. soda, energy drinks).” The measure is expected to generate $1.3 million annually in tax revenue, which would subsidize a variety of municipal projects.
The ABA – an longstanding industry group backed by major strategics Keurig Dr Pepper, PepsiCo and Coca-Cola, as well as many packaging companies and distributors – contends that Measure Z violates the state’s Keep Groceries Affordable Act of 2018.
The 2018 state legislation “expressly preempts localities from adopting various new taxes on groceries through 2031, including taxes on “carbonated and noncarbonated nonalcoholic beverages,” according to the legal filing.
ABA initially lobbied against Measure Z during the runup to voting. In its legal argument, plaintiffs cited that Santa Cruz city leadership was knowingly and explicitly challenging California’s 2018 bill, setting up for a contentious battle in court.
Joining the ABA in the lawsuit are several California retail organizations like the Grocers Association, Hispanic Chambers of Commerce, Alliance of Family-Owned Businesses, Fuels and Convenience Alliance, and the state’s Chamber of Commerce. The business associations claim that the tax will hurt local businesses and will disenfranchise minority communities who depend on lower grocery prices to support their families.
“Because the high cost of groceries is a matter of statewide concern, Santa Cruz lacked the power to enact Measure Z,” the legal briefing said.
The plaintiffs also pointed to similarities between Measure Z and Measure HH, Oakland’s 2017 city ordinance taxing sugary drinks. That tariff has reportedly reduced sugary drink consumption rates but the use of its funds has attracted criticism.
Oakland’s move eight years ago came during a flurry of local measures to tamp down on soda sales by levying taxes. But the taxation trend might be having a rebirth under President Trump’s second term and the elevated voice of Make America Healthy Again proponents.
U.S. Health and Human Services secretary Robert F. Kennedy Jr., along with USDA head Brooke Rollins, have been leading the charge in implementing restrictions on food and beverage products that potentially harm public health.
Last month, Nebraska became the first state granted a waiver to amend its Supplemental Nutrition Assistance Program (SNAP) program and effectively remove soda and energy drinks from the approved purchases list.
Across the country, six states from Colorado to West Virginia have submitted similar waiver requests to the USDA. Missouri, Idaho, Louisiana and others are also debating the issue in statehouses as well.
“Restricting SNAP purchases or banning safe ingredients won’t make anyone healthier – they only create headlines,” the ABA said in an April statement. “Rather, they’re punitive policies that leverage fearmongering and misinformation while taking decisions away.”