A new tax on sweetened beverages introduced in a Washington Senate committee meeting this week is upsetting Clark County business owners who see it as a threat to their enterprises already suffering during the pandemic.
Some Southwest Washington lawmakers, too, are skeptical that taxing sugary drinks will do more good than harm. But proponents and health care experts say reducing sales and raising revenue to treat the results of overconsuming sugar is in the best interest of Washington’s residents.
Senate Bill 5371 would impose a 1.75 cent tax per fluid ounce on all sweetened beverages. That adds up to a $5.04 tax on a 24-can case of soda.
At least 60 percent of the tax revenue from the new tax would go to a new statewide health equity account. That account would fund initiatives and resources aimed at providing access to nutritious food and health care for at-risk communities.
Local businesses worried
Heidi Schultz, president of the Washington Beverage Association and co-owner of Corwin Beverage Co., said the tax will likely mean a substantial job loss for the Ridgefield-based business, the distributor of Pepsi and Dr Pepper for Clark, Cowlitz, Skamania and Wahkiakum counties.
“We know that this is going to cost jobs,” Schultz said.
In 2010, a temporary tax on soda, bottled water, candy and some processed foods was overturned by Washington voters via Initiative 1107. Had it remained in place, the tax would have collected an estimated $217 million over the following two years.
At the time, Corwin had to lay off five people from its 115-person staff, Schultz said. The 2010 tax charged 2 cents per 12 ounces of carbonated beverages sold in the state, and it increased the cost of a 24-can case of soda by 48 cents.
Schultz said the new bill’s heavier tax of $5.04 per case of soda would force the company to eliminate between 30 and 70 employees from its current staff of 140.
“It doesn’t seem to make rational sense to us at this time,” said Walter Lachapelle, Teamsters business agent for Local 58, the union that includes workers for retail sales, distribution and warehousing. “It would kill our union jobs, and put more Washington families at financial risk.”
Schultz said the taxes will be passed down the supply chain; Corwin has 160 independent, locally owned convenience and gas stores in its franchise territory.
“It’s really going to hurt small local businesses,” Schultz said.
Don Rhoads, owner of eight convenience stores in Clark County, including some Minit Mart locations, said his stores would take huge financial hits because of the tax.
Rhoads estimates that each of his stores will lose $50,000 to $60,000 per year in gross profit revenue because of the tax, which means he’ll have to potentially make staff changes, including layoffs, and also raise the prices of sodas.
“The tax is going to be passed on to the consumer,” he said. “I can’t afford to take the hit.”
Rhoads and Schultz also said that Clark County will be disproportionately affected by the tax because of its proximity to Portland; Vancouver consumers could simply drive across the bridges and buy the same product in Oregon for a lower cost, where the tax doesn’t exist.
“We’re a border community,” he said. “There’s a spillover effect to retailers when this happens.”
The two business owners also said that the timing of the bill during the pandemic, when business is already significantly down, is additionally harmful. Coffee shops, bars and restaurants in Clark County have already seen revenue drop by up to 70 percent in some cases.
“The timing could not be worse,” Rhoads said. “Why now?”
Harmful effects of sugar
For lawmakers championing the bill, raising revenue while reducing sugary drink consumption is a positive prospect. During a Monday hearing in the state Senate’s Health and Long Term Care Committee, Dr. Ruchi Kapoor testified in favor of the proposal.
Kapoor, a practicing cardiologist and the president-elect of the American Heart Association Puget Sound Board of Directors, said she witnesses firsthand the devastating long-term impacts of sweetened beverages.
“There’s very clear science linking sugary drinks to negative health outcomes such as Type 2 diabetes and heart disease,” Kapoor told the committee. “I also want to emphasize that the revenue generated by this tax will be spent to support communities, especially communities of color, that have been the target of marketing by soda companies and who suffer from these negative health outcomes at a disproportionately high rate.”
In Seattle, where policymakers imposed the same 1.75-cent-per-fluid-ounce tax in 2018, a peer-reviewed study from the University of Illinois found that sales of sugar-sweetened beverages in the city dropped by 30.5 percent over the few subsequent months. In Portland, where no such tax exists, sales dropped by just 10.5 percent.
Local politicians doubtful
Lawmakers from Southwest Washington on both sides of the aisle remain unconvinced about the tax.
Sen. Annette Cleveland, D-Vancouver, who serves as the health committee’s chair, said Thursday that she’s reluctant to consider a tax that would disproportionately affect a hospitality industry already limping through the pandemic.
“The beverage tax, in my mind, does place a tremendous burden on an industry that is continuing to reel from the impacts of COVID-19,” Cleveland said.
Cleveland also has doubts as to whether taxing sugary beverages actually leads to better health outcomes, she said.
“I am open to continued discussion around ways to meet our goal of funding public health. In my mind, the bill that we heard on Monday … doesn’t meet some of the criteria I feel is important in moving the policy forward. I have too many questions about the policy, and the effectiveness of that policy,” Cleveland said.
Sen. Ann Rivers, R-La Center, also serves on the health committee. She expressed skepticism during Monday’s hearing, pointing out that shoppers and distributors in Southwest Washington can just drive across the border to avoid the tax in Oregon.
“I would vote no if SB 5371 comes to a vote in committee, and not just because of the regressive nature of this tax, and how it might affect where people shop,” she added in an email to The Columbian.
“It doesn’t make sense to tie health-related commitments to a revenue source that will, by design, diminish if this tax is successful in driving down the consumption of sweetened beverages,” Rivers said.