By Mike Esterl
Chicago's Cook County approved a penny-per-ounce tax on soda and other sweetened beverages Thursday, hoping to raise more than $200 million a year to help bridge a budget gap.
It is the seventh local government in the U.S. to pass such a measure -- and the fifth this week. Cook County is by far the largest, spanning an estimated 5.2 million residents.
The taxes are a growing threat to beverage industry giants like Coca-Cola Co., PepsiCo Inc. and Dr Pepper Snapple Group Inc. after they spent tens of millions of dollars in recent years successfully opposing them in dozens of cities and states.
Cook County Board President Toni Preckwinkle cast the deciding vote in favor of the special levy Thursday after a vote by commissioners ended in a deadlock.
The tax is slated to go into effect July 1, 2017.
Voters in San Francisco, Oakland and Albany, Calif., on Tuesday approved ballot measures for a penny-per-ounce levy on nonalcoholic drinks with caloric sweeteners affecting everything from soda to sports drinks and ice tea to energy drinks. In Boulder, Colo., residents approved a tax of two cents an ounce on the same day.
The Cook County tax will be applied more broadly to include beverages with zero-calorie sweeteners like diet soda. The county estimates the tax will raise $221 million annually, enough to balance its budget.
Philadelphia became the first large U.S. city to pass such a tax in June, when the city council approved a levy of 1.5 cents per ounce. The beverage industry has sued to try to stop Philadelphia's tax before it goes into effect in January.
Tax proponents say sugary drinks contribute to obesity, diabetes and tooth decay and that the tax receipts can be directed to health programs or budget shortfalls. Beverage companies say their products are being singled out unfairly and that the special tax is regressive and increases grocery bills.
The long-term effect of taxes on consumption remains unclear. In Berkeley, Calif., the first U.S. city to pass such a measure in 2014, one study estimated consumption fell by about a fifth in low-income neighborhoods in the months after the tax was introduced. The beverage industry said the study was flawed.
Special beverage taxes are levied on distributors. At a penny an ounce, the tax can increase prices by 20% or more if fully passed along to consumers, industry trackers have estimated.
In a statement, Cook County's Ms. Preckwinkle said the beverage tax will help avoid cuts to public health and public safety and put the county on a stable financial footing for the next three years. Supporters included the American Heart Association and former New York City Mayor Michael Bloomberg, who contributed $1 million toward advertisements praising the initiative.
Opponents criticized Thursday's vote, saying it will result in fewer jobs and higher grocery bills. "Consumers and small businesses will now have to pay the price and bear the burden of Cook County's budget deficit," said the Cook County Coalition Against Beverage Taxes, which includes retailers and beverage companies.
Cook County residents are still digesting a recent increase in their sales tax, to 10.25% from 9.25%.
Even without special taxes, U.S. volumes of carbonated soft drinks declined 1.2% in 2015, the 11th straight yearly decline, according to Beverage Digest, a trade publication.Many consumers are switching to bottled water, which could surpass soda consumption in the U.S. for the first time this year.
Beverage companies say they are taking steps in response to health concerns, including introducing smaller cans and bottles and promoting more zero- and mid-calorie sodas. Coke, PepsiCo and Dr Pepper pledged in 2014 to cut beverage calories in the American diet by 20% by 2025.
"We remain committed to investing our energy and resources and comprehensive efforts that will meaningfully address these complex health challenges," the American Beverage Association said in a statement Thursday.
A spokeswoman for the industry association declined to comment on whether it would lodge a legal challenge to Cook County's planned tax.
There are no signs that Congress is considering a federal tax on sugary drinks and recent attempts by lawmakers in some states to introduce statewide taxes have failed. But healthauthorities increasingly are urging consumers to scale back.
The Food and Drug Administration recommends that Americans limit their daily intake of added sugars to about 12 teaspoons or 200 calories -- less than in a 20-ounce bottle of regular Coke or Pepsi. By 2018, U.S. nutrition panels on food and beverage packaging must list how many grams of caloric sweeteners manufacturers added and the daily recommended maximum.
Write to Mike Esterl at email@example.com
(END) Dow Jones Newswires
November 10, 2016 18:45 ET (23:45 GMT)
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