‘Job Killer’ Beverage Tax Fails to Pass Assembly Health Committee

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JopKillerLegislation targeting certain beverages for a new tax was rejected by the Assembly Health Committee this week.

The California Chamber of Commerce opposed AB 1357 (Bloom; D-Santa Monica) as a “job killer” because it threatened jobs in beverage, retail and restaurant industries by arbitrarily and unfairly targeting certain beverages for a new tax in order to fund children’s health programs.

Tax, Not a Fee

Despite its description as a “health impact fee,” AB 1357 actually sought to impose a $0.02 excise tax on each fluid ounce of a bottled sweetened beverage and a $0.02 excise tax on each fluid ounce produced from a concentrate from which a sweetened beverage is derived.

The revenue from this tax would have been used to fund the Children and Family Health Promotion Trust, which would have provided state agencies with the authority to issue grants to county governments, nonprofits and other community organizations to invest in childhood obesity and diabetes prevention, as well as oral health.

Given that the benefit from this revenue would go to recipients beyond just those who actually pay the “fee” and that the “fee” does not fall within any of the other listed exceptions under the California Constitution, it is a tax.

Higher Prices, Job Loss

This targeted tax would certainly have been passed on to consumers through higher prices. As a result of the passage of Proposition 30, California now has the highest sales and use tax rate in the nation at 7.5%, as well as the highest personal income tax bracket at 13.3%. Residents of California already are highly taxed, and AB 1357 would only have contributed to their overall costs of living in this state.

Moreover, given that the intended effect of AB 1357 is to deter consumers from purchasing such beverages or concentrates, it would have had a direct impact on the beverage industry and its employees.

This proposed tax would have forced these businesses to adjust for their losses, including potential reductions in their workforce. The business community consistently maintains that, if a tax is necessary, it should be only temporary and broad based so that the impact is minimized as the tax burden is shared by all instead of an individual business or industry.

New Revenue Pressure

AB 1357 would have created a new fund for the revenue from this excise tax in order to educate people on and prevent childhood obesity as well as improve dental health. The CalChamber appreciates the effort to address this health issue; however, the CalChamber was concerned by the creation of additional state programs that ultimately may rely upon General Fund revenue in order to survive.

If AB 1357 deterred consumers from purchasing sweetened beverages, as intended, than this excise tax is a decreasing revenue source. The programs created by AB 1357 would have simultaneously experienced a loss of funding as the revenue decreased, thereby potentially placing more pressure on the General Fund to replace the declining revenue. California has struggled over the past several years with budget cuts and revenue loss.

Although the passage of Proposition 30 has provided relief, there is not necessarily additional revenue to support more programs.

Key Vote

AB 1357 failed to pass Assembly Health on May 12, 6-10:

Ayes: Bonta (D-Alameda), Bonilla (D-Concord), Chiu (D-San Francisco), Nazarian (D-Sherman Oaks), Thurmond (D-Richmond), Wood (D-Healdsburg).

Noes: Maienschein (R-San Diego), Burke (D-Inglewood), Chávez (R-Oceanside), Gonzalez (D-San Diego), Roger Hernández (D-West Covina), Lackey (R-Palmdale), Patterson (R-Fresno), Ridley-Thomas (D-Los Angeles), Steinorth (R-Rancho Cucamonga), Waldron (R-Escondido).

Absent/abstaining/not voting: Gomez (D-Los Angeles), Rodriguez (D-Pomona), Santiago (D-Los Angeles).

2015 ‘Job Killers’

To view the status of the 2015 “job killer” bills, visit www.CAJobKillers.com.

Staff Contact: Jennifer Barrera

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Jennifer Barrera
About Jennifer Barrera
Jennifer Barrera, senior policy advocate, works with the executive vice president in developing policy strategy and represents the CalChamber on labor and employment, taxation and legal reform issues. Before joining the CalChamber in September 2010, she worked at a statewide law firm that specializes in labor/employment defense. She also advised small and large businesses on compliance issues, presented seminars on employment-related topics, and authored articles in human resources publications. Barrera earned a B.A. in English from California State University, Bakersfield, and a J.D. with high honors from California Western School of Law.