A sweetened beverage tax would help fund public health

By: Emily Makings
3:21 pm
February 10, 2021

SB 5371 would impose a statewide tax on distributors of sweetened beverages, with the intent to lower consumption of sweetened beverages and promote both foundational public health and health equity.

Under SB 5371, the tax rate would initially be 1.75 cents per fluid ounce. The rate would be increased by inflation each July 1. Distributors would be able to take a credit against the state tax due for the amount paid in sweetened beverage taxes to the City of Seattle.

The bill would create a “health equity account,” to which 60% of the new revenues would be directed. (The account would be “used to address social determinants of health in disproportionately impacted communities burdened by negative health outcomes.”)

The remaining 40% of collections would be deposited in the foundational public health services account. There is not a fiscal note for the bill yet. (Note that the proposed covered lives assessment would also be used to fund foundational public health.)

Of course, the two purposes for the bill—to lower consumption and raise revenues for public health—are at odds. If such a tax is successful in reducing consumption, there would be fewer revenues for public health.

The experience in Seattle doesn’t provide concrete answers. In 2017, the City of Seattle imposed a sweetened beverage tax on distributors, effective Jan. 1, 2018. The city ordinance is slightly different from SB 5371, but the tax rate is the same (although it is not indexed to inflation). Collections totaled $22.3 million in 2018 and $24.1 million in 2019. They are currently estimated to be $15.4 million in 2020 and $20.7 million in 2021.

As Kevin Schofield of Seattle City Council Insight wrote last year, there have been multiple studies of the effects of sweetened beverage taxes, with results that have been “all over the map.” A report commissioned by the City Council as part of the ordinance found last year that beverage prices increased in Seattle (as the tax was passed through to consumers), but observed decreases in sweetened beverage consumption “may not be attributable to Seattle’s sugary beverage tax.” (Because consumption declined even in the comparison area where the tax wasn’t in effect.)

Another consideration for the Legislature is that pop taxes have not been popular. In 2010, the Legislature imposed an excise tax on carbonated beverages at a rate of 2 cents per 12 ounces. Later that year, voters approved I-1107 (60.4% to 39.6%). Among other things, I-1107 repealed the carbonated beverage tax.

In 2018, I-1634 was approved 55.9% to 44.1%. It bans local taxes on groceries. Although it was proposed in response to Seattle’s sweetened beverage tax, I-1634 left Seattle’s tax in place (though Seattle may not increase its tax rate).

Categories: Budget , Health , Tax Policy.