Santa Cruz Implements 2-Cent-Per-Ounce Sugary Drink Tax

In a significant move, the beachside community of Santa Cruz in Northern California has implemented a tax on sugary drinks, marking a notable development in the ongoing debate over local taxation and public health. This tax, which came into effect recently, is the first of its kind in the state since a 2018 deal that banned local grocery taxes as part of a compromise with the beverage industry. The 2-cent-per-ounce tax, approved by Santa Cruz voters in November, aims to reduce sugar consumption, particularly among children and teens, and to fund health programs and community initiatives.

Despite legal challenges and opposition from various groups, including labor unions and small businesses, Santa Cruz officials are prepared to defend the tax in court. They hope that their actions will inspire other states and cities to follow suit. The tax applies to a wide range of non-alcoholic beverages containing added caloric sweeteners, with an exemption for small businesses with less than $500,000 in gross receipts annually. While some local businesses, like Tacos Moreno, have expressed concerns about the impact on their prices, tax advocates see the move as a significant victory for public health.

The journey to implementing this tax has been fraught with legal battles. In 2018, California lawmakers passed the Keep Groceries Affordable Act, which banned local taxes on soda and other sugary drinks until 2031. This act was a result of a deal that saw the withdrawal of a beverage industry-backed ballot measure, which would have made it harder for cities and counties to increase any taxes. However, Santa Cruz city leaders did not abandon their plans. They sued, arguing that the penalty provision in the act unlawfully targeted voter-approved charter cities from exercising their authority over local affairs.

In 2023, a state appeals court struck down the penalty provision as unconstitutional, but did not rule on the preemption itself. This legal victory paved the way for the Santa Cruz City Council to place a tax measure on the ballot in June, which was subsequently approved by voters in November. The tax measure passed with a narrow margin of 52 to 48, despite the "no" side spending significantly more on the campaign. The american beverage Association, which represents major beverage companies, has expressed concerns about the tax's legality and potential strain on city resources. The organization spent heavily to campaign against the ballot measure and has indicated that it is assessing its next steps.

Opponents of the tax argue that it disproportionately impacts low-income families and hurts local businesses, while health advocates see it as a necessary measure to combat obesity and related health issues. Dr. John Maa, a San Francisco surgeon and chair of the American Heart Association's advisory committee in California, believes that the future of sugary drinks taxes may lie in smaller communities where grassroots support can be mobilized effectively. This development in Santa Cruz is seen as a major step forward for the soda tax movement, highlighting the potential for local initiatives to drive broader change.