Soda Tax Myths: Are Beverage Companies Friends to the Poor?

by Dana Woldow on January 14, 2014

In early February, four members of the San Francisco Board of Supervisors expect to introduce legislation for the November ballot to levy a 2 cents per ounce tax on distributors of soda and other sugary soft drinks. The money raised would help support healthy food, nutrition education, and physical activity in schools and communities throughout the city. Given the American Beverage Association’s (ABA) history of spending whatever it takes to defeat such measures, we can expect a year of nonstop entertainment as arguments for and against the so-called “soda tax” fly back and forth. Supervisor Eric Mar, one of the sponsors of the legislation, told the SF Chronicle that he expects to see “the most ever spent to try to defeat a local ordinance.”

The typical arguments against soda taxes fall into three main categories: predictions of grim economic consequences, allegations of government intrusion into personal freedoms, and denials that soda is linked to poor health.

We are sure to hear the phrases “nanny state” and “personal choice”, and dire warnings that taxing sugary drinks is a slippery slope down which we will slide into the unholy maw of a City Hall that dictates what is and is not appropriate for our families. Perhaps the beverage industry thinks these limited-government arguments will resonate with employees of the 1900 tech companies currently located in SF, who tend to be perceived as more libertarian than traditional SF “progressives.”

But with widespread public concern about the rising cost of living in SF (driven by skyrocketing housing costs), and lower to middle income earners feeling increasing pressure to move out of the city, it may turn out to be not the “freedom to choose” angle, but rather the beverage industry’s economic fear mongering that plays the lead role in the ABA’s ‘No Soda Taxes’ minidrama.

The economic scenario includes the claim that a soda tax will lead to a loss of jobs in every aspect of the soft drink industry, from factory production to delivery drivers, resulting in higher unemployment here and across the country, as well as hurting the small mom and pop businesses that rely on soft drink sales for much of their revenue. Another popular allegation is that soda taxes punish poor people, falling hardest on those with the lowest income.

You’d almost think that soft drink companies are the best friends lower income folks ever had, since wherever soda taxes have been proposed, there is always professed concern for possible impact on small groceries, higher unemployment, and that popular bugaboo, the “regressive” tax.

What is a “regressive” tax? The IRS defines it as “a tax that takes a larger percentage of income from low-income groups than from high-income groups”, and further elaborates that “such a tax causes lower-income people to pay a larger share of their income than wealthier people pay.”

That’s easy enough to understand – if a soda tax of 24 cents is added to the purchase price of a 12 ounce soda , the individual who makes $240 a week must pay 1/1000 of his weekly income to cover the tax on this purchase, while the individual earning $2400 a week pays 1/10,000 of his income.

A soda tax also may be considered “regressive”, impacting poorer communities more than wealthier communities, because studies show that poor people buy more soda than rich people. Thus, a tax on soda, the story goes, hits low income people harder than the wealthy.

Know what else hits low income people harder? Life.

Virtually every expense – from housing and food to transportation and health care – hits low income people harder than wealthier folks, and takes a larger percentage of a poor person’s income than a middle class or rich person’s income.

Know what else hits low income people harder? Poor health.

Living in poverty can double or even triple the likelihood of developing diabetes, according to leading health researcher and Professor Dennis Raphael, who says “not only are low-income and poor people more likely to get [diabetes], but they’re also the ones that, once they get it, are much more likely to suffer complications. And the complications from Type 2 diabetes when they’re bad are really bad, whether it’s amputations, or blindness, or cardiovascular disease.”

The World Heart Federation says, “Being poor, no matter where in the globe, increases your risk of heart disease and stroke.” A 2011 study done at UC Davis found that “people with lower socioeconomic status had a 50% increased risk of developing heart disease compared to other study participants.”

If beverage companies, virtually all of which also sell bottled water and sugar-free diet drinks, really wanted to be supportive of low income people, wouldn’t they be encouraging them not to drink sugary beverages, since studies have linked their consumption to heart disease and to diabetes?

Know who has the lowest household income in San Francisco? Families of color.

According to the most recent (2010) U.S. Census American Community Survey, median household income for African Americans is the lowest in San Francisco, at $29,409, followed by mixed race households at $39,779, “other” race households at $46,245, American Indian households at $56,151, and Hispanic households at $56,861. Median household income for Asians was $60,914, while for whites it was $86,837.

But beverage companies target communities of color with their advertising, especially minority children and youth, despite the fact that the Centers for Disease Control and Prevention (CDC) says, “African Americans, Hispanic/Latino Americans, American Indians, Asian Americans, and Pacific Islander Americans are at particularly high risk for type 2 diabetes.”

A 2010 study found that “people with a daily habit of just one or two sugar-sweetened beverages—anything from sodas and energy drinks to sweetened teas and vitamin water—were more than 25 percent likelier to develop type 2 diabetes than were similar individuals who had no more than one sugary drink per month”, according to US News & World report.

Beverage companies are not friends to low income people. If they were, they wouldn’t use their financial resources to turn leaders of communities of color against their own people.

A 2013 report from the non-profit health-advocacy organization Center for Science in the Public Interest (CSPI) called “Selfish Giving: How the Soda Industry Uses Philanthropy to Sweeten its Profits”, explains how major soft drink companies leverage minority group partnerships to advance their policy objectives. By providing grants and scholarships, says the report, soda industry leaders are able to obtain seats on advisory boards of organizations such as the Hispanic Federation and the NAACP. Then comes the payback.

“On numerous occasions the industry has collected favors from its grantees, recruiting them to sign petitions, send public letters to officials, submit a “friend of the court” brief supporting industry’s position in controversial litigation, and testify before legislative committees and regulatory bodies. Big Soda’s philanthropy has steered numerous groups to oppose policies that would have benefited the health of the very communities that those organizations serve.”

The CSPI report also has chapters on how beverage companies use minority organizations to lend credibility to Astroturf groups – organizations created by industry lobbyists that attempt to pose as legitimate grassroots organizations – and how they target minorities through cause-related marketing.

The partial list of health and minority organizations with financial ties to the beverage industry (found in Appendix A of the report) includes the National Association of Hispanic Journalists ($50,000 for scholarships and internships in 2011 alone from Pepsi); 100 Black Men of America (Coca-Cola listed as a partner & Sponsor; $150,000 grant for fitness and health programming in 2012); the Hispanic Scholarship Fund ($20 million non-cash commitment with Coca-Cola for marketing; received $250,000 cash in 2010); and the NAACP (Coca-Cola gave $100,000 in 2010), to name just a few.

Levying a 2 cents per ounce tax on distributors of sugary beverages might well increase the purchase price of these drinks, but it wouldn’t have to. It is taken for granted that the cost will get passed along to consumers, but if beverages companies really are concerned about the impact on their customers, then why don’t they just absorb the additional cost, and try to offset it with increased efficiencies within their own operation? For example, the tens of millions of dollars spent lobbying against soda taxes, and the billions spent advertising soft drinks to children and teens, could instead be redirected to helping underwrite the cost of proposed taxes.

But we all know that won’t happen, will it? Because soda companies are not charitable foundations, they don’t exist to help low income folks improve their lives, or their health – they exist to make money for their shareholders.

Feigned solicitude for how soda taxes might fall hardest on poor people, or hurt small businesses, or drive unemployment is just a cover for the industry’s real worry – soda taxes will hurt their bottom line. As to any sincere concern for their customers, to paraphrase 7-Up, soft drink companies “Never had it, never will.”

Read other articles in the Soda Tax Myths series:
Soda Tax Myths: The Arkansas Argument

Soda Tax Myths: Soda Taxes Distract from Real Issues

Dana Woldow has been a school food advocate since 2002 and shares what she has learned at Follow her on Twitter @nestwife.

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