San Francisco November 2016

San Francisco
November 2016

Ballot analysis and recommendations

Overview chevron_right Prop V
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Prop V

Soda Tax

Tax on Distributing Sugar-Sweetened Beverages

Levies a tax of 1 cent per ounce on sugar-sweetened drinks distributed in San Francisco.

Vote YES

What the Measure Would Do

Proposition V would impose a tax of 1 cent per ounce on drinks that have added sweeteners and contain more than 25 calories per 12 ounces. The measure is intended to discourage the distribution and consumption of sugarsweetened beverages. The tax would cover most non-diet sodas, sports drinks and energy drinks distributed in San Francisco. Milk, infant formula, meal replacements, 100 percent juices, alcohol and drinks prepared by hand would be exempt.

The tax would be paid by distributors, the businesses that sell and deliver beverages to retailers and restaurants. The tax would generate an estimated $14 million to $24 million in revenue annually.1 The revenue from the tax would be added to San Francisco’s General Fund.

The measure would establish an advisory committee of public health professionals and community members who would produce an annual report to the mayor and Board of Supervisors. The report would evaluate whether the tax is reducing the consumption of sugar-sweetened beverages and would include recommendations for how to spend the tax revenue on programs that promote nutrition and physical activity and that could further reduce consumption.

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The Backstory

Sweetened drinks are the single largest source of sugar for American adults and children, and research shows that they are associated with diet-related disease.2 Recent studies demonstrate that 46 percent of adults in San Francisco are either overweight or obese, and nearly one in 13 San Franciscans are living with diabetes.3 The San Francisco Budget and Legislative Analyst estimates that each year sugary drinks cost San Franciscans $41 million to $61 million in public and private health care treatment, including $6 million to $28 million incurred by city agencies. Researchers at the Centers for Disease Control and Prevention estimate that, without significant public health intervention, one in three Americans could have diabetes by 2050.4

Early initiatives to reduce the consumption of sugary drinks by taxing them have shown signs of being effective. After Mexico imposed a tax on sugary drinks in 2014, researchers found that consumers in Mexico reduced their consumption, confirming that the tax had the intended effect.5

After a decade of failed attempts to pass a sugar-sweetened beverage tax at the state level, California’s public health advocates began turning to local measures. In November 2014, voters in both San Francisco and Berkeley considered sugar-sweetened beverage taxes. A majority of voters in San Francisco supported the city’s measure in 2014, but it didn’t pass because it fell short of reaching the two-thirds supermajority required for taxes that dedicate revenue to a specific purpose. (The proceeds would have been earmarked for programs related to healthy eating and active recreation.) Berkeley’s measure, which was a general tax that only required a simple majority, did pass (and, notably, received 75 percent support).

This year’s San Francisco measure is modeled on Berkeley’s measure, which went into effect in March 2015. As with the Berkeley measure, Prop. V does not earmark the revenue for any specific purpose but does create an advisory committee that would be tasked with making recommendations for how the revenue could be spent to further promote public health. Citizens in the cities of Oakland and Albany will also be voting on sugar-sweetened beverage tax measures this November; both are modeled on the Berkeley measure.

This measure was placed on the ballot by a vote of the Board of Supervisors and must be on the ballot because it is a tax measure. As a general tax, the measure requires a simple majority (50 percent plus one vote) to pass.

Pros

  • San Francisco is facing a public health crisis of diet-related disease, with substantial public costs. A tax on sugar-sweetened drinks would reduce the consumption of beverages that are closely linked with obesity, diabetes and diet-related disease and would generate revenue that could be used to further support complementary public health efforts.

Cons

  • The measure is a regressive tax: Because it would be applied uniformly, it would have a greater impact on lower-income drinkers of sugary beverages than on those with higher incomes.

  • Because this tax would only apply to San Francisco, it might lead customers to shop outside the city for lower-priced drinks, which might undercut its intended effect and could reduce revenue for San Francisco businesses.

  • Since the tax would only affect merchants who sell sweetened drinks in cans or bottles or from drink dispensers — not those who prepare sugary drinks on site, such as coffee houses — it could create an unfair advantage for certain vendors.

SPUR’S Recommendation

While many other factors influence public health, there is convincing evidence that liquid sugar is especially pernicious and merits policy intervention. The proposed tax is a reasonable and targeted policy tool that could help reverse the trend of rising rates of obesity and diabetes and the related increases in public health costs.

Though the measure is a regressive tax, it taxes something that is not essential to daily life. Sugary drinks can be easily avoided. A tax of this nature would be better implemented at the state level, but after a decade of failed attempts to pass such legislation in Sacramento, we cannot continue waiting for a state-level tax. Given the severity of diet-related public health problems, this measure merits support.

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