Santa Cruz Thumbs Its Nose at Soda Industry With New Tax

Santa Cruz is set to begin collecting a new tax on sugary drinks starting Thursday, marking the first such levy in California since a 2018 state law that blocked new local grocery taxes. Voters in the city of 60,000 approved the measure in November, establishing a 2-cent-per-ounce tax on sugar-sweetened beverages that contain 40 calories or more per 12 fluid ounces. The move goes against the 2018 Keep Groceries Affordable Act, which was passed as part of a deal with the beverage industry and bans new local soda taxes until 2031. The Santa Cruz vote followed a 2023 court decision that struck down a key penalty in the earlier law, reports the AP. As the East Bay Times explains, the law is still on the books, but the penalty for breaking it can't be enforced.

Despite heavy spending by opponents ($2.8 million versus under $100,000 from supporters), the tax passed 52% to 48%. The American Beverage Association—which represents big names like Coca-Cola and PepsiCo—was among those who funded the opposition campaign and continues to challenge its legality. Other opponents, including labor unions and small businesses, argue that the tax unfairly burdens working families and risks hurting local businesses, especially as inflation remains high. The tax exempts small businesses making under $500,000 a year.

Santa Cruz's city leaders argue the measure is about local control, public health, and reducing sugar consumption, especially among youth. The East Bay Times reports it's expected to bring in $1.3 million a year. They have signaled a willingness to defend the tax in court. Berkeley, California, in 2014 became the first city in the US to pass a tax on sugar-sweetened beverages, and some other cities have followed. A University of Berkeley study released in January 2024 found that in Boulder, Philadelphia, Oakland, Seattle, and San Francisco—which all instituted such taxes between January 1, 2017, and January 1, 2018—prices went up 33% in the two years after the tax was introduced, while consumption declined 33%. (This content was created with the help of AI. Read our AI policy.)