After divisive meeting, soda tax legislation headed for final vote Monday

The soda tax legislation made it out of committee yesterday and is headed for a final approval vote on Monday. But in the absence of a clear consensus on the goals of the bill, it took a loose federation of Council members with overlapping interests, some earmarked spending, and a fair amount of holding their noses to get it passed through today. And Council member Tim Burgess is still rushing it through without a clear explanation of why that is necessary.

The Council members waded through seven amendments, to reshape the Mayor’s original proposal to something more to their liking.

The first amendment, offered by Burgess, was a comprehensive “omnibus” effort that rewrote major terms of the ordinance. Most significantly, it limited the tax to sugared beverages only, excluding artificially sweetened “diet” beverages. Doing so decreases the revenue and increases the disparate impact on communities of color, but maximizes the health impacts of the tax by making diet drinks a cheaper alternative and thus a more attractive substitution for sugared ones. Burgess’s amendment also rewrites the list of programs the tax revenues will fund, with a greater emphasis on public health, nutrition, food access and closing the food security gap — as Council member Juarez demanded. It reduces but doesn’t entirely eliminate the emphasis on programs to address disparate outcomes in education; specifically it maintains funding for birth-to-five programs (Burgess’s signature effort) and the 13th Year Promise Scholarship Fund (Council President Harrell’s signature effort).

With an understanding that raising prices will decrease consumption by an estimated 12 to 20 percent — and thereby tax revenues over time  — Burgess’s amendment maintains the ordinance’s set-aside of 20% of revenues each year for the first five years to be spent on one-time expenses to the extent the revenues actually materialize; however, it specifies that the funds should go to startup costs, providing up to $5 million for the 13th Year Promise scholarship endowment, up to $1.5 for job retraining for workers impacted by the tax, and funding capital projects for classrooms for use by the Seattle Preschool Program.

The amendment also adds two exemptions: one for manufacturers with worldwide gross income of $2 million or less, and another for manufacturers who make and sell their own product directly to consumers without the use of a distributor (e.g. at farmers markets).

Burgess’s amendment was unanimously adopted by the seven Council members at the committee meeting (everyone except Harrell and Juarez).

Council member Herbold then offered three amendments of her own. Two were intended as a package: one reduced the tax from 1.75 cents per ounce to 1 cent per ounce, and other pulled “diet” drinks back into the list of taxed products. Herbold’s analysis led her to the conclusion that 1.75 cents was simply too high and would be “punitive;” she offered a chart of comparable “sin taxes” intended to discourage use of the products and noted that at 1.75 cents the tax would be far higher than cigarettes, alcohol, or marijuana — but1 cent per ounce would be right in the middle of the pack.

The point of adding back in diet drinks was two-fold: first, to make the switch to a lower tax rate roughly “revenue neutral” by compensating in volume for per-item revenues lost; and to lessen the disparate impacts of the soda tax on poorer people by broadening the set of people who are paying it  (people in higher income brackets tend to drink more diet drinks and less sugared ones).

In the end, though, both of the amendments failed, and in doing so showed that the Council members were still not of one mind on the purpose and value of the soda tax. Council member Sawant noted that the soda tax is highly regressive (it is) and said that she was only supporting it at all because community members had rallied to support it; she gave her support to Herbold’s two amendments in order to lessen the disparate impacts. Council member O’Brien, on the other hand, has been the most fervent proponent of the notion that the soda tax is first and foremost about dramatically reducing consumption of sweetened beverages; he voted against lowering the tax to 1 cent per ounce in order to keep the price as high as possible, but he voted for broadening the tax to diet beverages because he believes over time research will prove that artificially sweetened drinks are as unhealthy as sugared ones.  Herbold’s paid of amendments failed to gain support from any of her other colleagues.

Herbold’s third amendment provides guidance to the advisory committee overseeing allocation of the tax revenues as to the Council’s intended priorities for various programs. It passed easily.

Council member Johnson offered an amendment that would modify the tax to be based on the amount of concentrate, powder or syrup that a distributor sells, rather than the amount of finished drinks that end up being made using those products. His intent was to simplify the tax calculation and payment for distributors, but it would have dramatically reduced the amount of tax revenues from distributors. It was clear that Johnson hadn’t done the homework on the financial impact of his amendment, and was seen as a giveaway to big companies. Only Herbold and Johnson supported it, and it quickly failed.

Council member Gonzalez offered an amendment to help small businesses that would reduce the tax rate to 1 cent per ounce for small businesses making between $2 million and $5 million per year (businesses under $2 million were already exempt from paying the tax under the terms of Burgess’s adopted amendment).  O’Brien voted against it, reiterating that he wanted to maximize the decrease in consumption of sweetened beverages and didn’t want to make any exemptions Sawant also voted no, arguing that the “poster child” company, Rachel’s Ginger Beer, sells at a higher price point to richer audiences; she believed that those customers can afford to purchase the product at an even higher price. But everyone else voted for it, and Gonzalez’s amendment passed by a 5-2 vote.

The final amendment was a tiny technical one that easily and quickly passed.

Then came the vote to pass the amended bill out of committee and on to the full Council for adoption — and two Council members chose to vote against it. It’s no surprise that Herbold was one of them; she said that she supported the plan to use the proceeds, but sees the bill as “unfairly regressive,” “punitive,” having a disparate impact on communities of color and small businesses that serve them, and “out of whack” with the taxes put on other products they want to discourage.

In a bit of a surprise, Sawant flipped and became the second “no” vote. She said that it was very difficult for her because dedicated community activists support it. But she had pinned her hopes on Herbold’s amendments passing to reduce the regressive impact; without those changes she withdrew her support.

The final bill passed out of committee with a 5-2 vote: Burgess, Johnson, O’Brien, Gonzalez and Bagshaw in favor, and Herbold and Sawant against.

Then another strange thing happened. The Council’s standing rules dictate that a bill passed out of committee by a divided vote must wait an extra week before coming before the full Council for final adoption, to allow for a written report to be circulated on the disagreements debated in committee and for the Council members — including the ones who weren’t present at the committee meeting — to discuss and reflect on the differing perspectives before voting. But after the bill passed, Burgess immediately moved for the committee to suspend that rule (assuming Council President Harrell gives his assent) so that the bill could come before the full Council this coming Monday instead of the following week. All seven committee members present voted in favor of suspending the rule, including the two who voted against the bill.

Once again, Burgess moved to rush this bill through the legislative process despite deeply held differences among the Council members on important issues. I have sent multiple inquiries, including one after yesterday’s meeting, to Burgess’s office to find out why he is rushing this bill through, and he has not responded. I also asked Herbold yesterday afternoon why she voted in favor of suspending the rule; she responded, “I think the better question might [be] why the motion to waive the rules for a Monday vote?” When pressed, she added, “I didn’t want to appear to be a sore loser just because my position did not prevail.”

This is a very messy piece of legislation, passed through an equally messy legislative process by a cobbled-together coalition of Council members with overlapping agendas. They are looking the other way at the well-understood regressive aspect of this tax in favor of doubling-down on a public health intervention. They abandoned the Mayor’s original plan to use the tax revenues to fund his Education Action Plan in order to focus on health, nutrition and food access programs, but left in carve-outs for some pet education projects and vaguely threw a bone to the call for job retraining for impacted workers.

On one hand, you could say that this is representative politics in action: compromise and a bit of horse-trading to move past stalemate and build enough of a coalition to get things done. But rushing through a bill that still lacks consensus on its primary goal and beneficiaries is not a shining example of good governance. The bill has even led to some unlikely bedfellows: yesterday the King County Labor Council and the Seattle Metropolitan Chamber of Commerce issued a joint press release opposing the soda tax legislation.

Here’s the SeattleChannel video of the meeting so you can watch it yourself.

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