Boulder’s Soda Tax Is Now In Effect. What Does That Mean?

Jul 3, 2017

If you’re in Boulder and buying soda for the Fourth of July, it could cost considerably more than just a few days ago. The city’s tax on beverages with added sugar -- like soda, sports drinks, energy drinks and sweetened teas and coffees -- went into effect July 1.

Because it’s the highest of its kind in the country, all eyes are on Boulder to see how it works.

As a city hall reporter with The Daily Camera, Alex Burness has been thinking a lot about sugary drink taxes for the past year and a half. When public health advocates with the group Healthy Boulder Kids said they were putting a soda tax on the 2016 ballot, the paper first sent an intern to cover it.

“Then we realized this is a really big thing,” Burness says. “It turned into, of course, the most expensive municipal election we’ve ever had.”

The campaign pitted public health activists against beverage companies like Coca-Cola and Pepsi, and the industry trade group the American Beverage Association. Issue committees both for and against the tax measure spent a combined $1 million, making it Boulder’s most expensive municipal ballot measure on record. In the end, voters chose to tax their own sugary drinks by two cents per fluid ounce, 54 percent voting in favor, 46 percent opposed.

The revenue raised is earmarked to be spent on community health programs geared toward low-income populations that see a disparate effect of chronic conditions like heart disease, diabetes and obesity.

To Burness, who reports on the health-conscious, highly-educated, high-income community of 105,000 people, the measure’s passage was not a surprise.

“If you are trying to start a movement to regulate or tax sugar, Boulder is about as good a place as any on Earth to start,” he says.

While some are excited to see the tax take effect, it’s easy to find those who aren’t. When Burness chats up clerks at gas stations, convenience stores and grocery stores, they’re not eager.

Add commercial-scale kombucha brewers to that list too. Jamba Dunn -- the founder of Rowdy Mermaid Kombucha in Boulder -- is one of them. Kombucha is a fermented tea drink that has surged in popularity over the last few years. So much so that Dunn just expanded his production facility.

“Sugar is essential to fermentation,” Dunn says. “So you can’t have fermentation without sugar.”

That means some, though not all, of Dunn’s products are above the five grams of sugar per 12 ounces threshold laid out in the ordinance, and now subject to the new tax.

“The thing that irks us is that we’re not soda, we’re not ‘Big Soda,’ as it was sold to the public, in quotes,” Dunn says. “We are going to be affected by a tax that was supposed to be on distribution.”

The details of the tax’s implementation weren’t fully fleshed out until after the measure passed last November. Over the last few months it’s been Jamie Harkins’ job to figure out who would pay the tax and which drinks were sugary enough to be subject to it, and then advise the Boulder city council.

“This is really a tax on the distribution of beverages, not a retail sales tax,” Harkins says. “And so we have to find out who all these distributors are; they’re not folks we’ve taxed before.”

Small and large distributors will have the option to swallow the tax themselves, or, the more likely option, pass it down the line to restaurants, grocery and convenience stores and then on to consumers. Jamba Dunn is also concerned the tax burden could be shifted to small-time manufacturers like him.

“The end consumer is now unable to buy the products that they love because they’re out of their price range. And I don’t mean Coke and Pepsi,” he says.

In the course of crafting the ordinance’s final language, the city fielded a handful of requests from liquor stores, beverage manufacturers and the University of Colorado, all asking for exemptions from the tax. Only cocktail mixers got one. CU-Boulder did as well but later rescinded their request.

Boulder now joins other cities and local governments using sugary drink taxes to both raise revenue and curb overconsumption. Berkeley, Cali., Philadelphia, San Francisco, Cook County, Ill. and Seattle have all passed similar taxes within the last four years. Berkeley’s took effect in January 2015. Researchers at Tufts University and the Harvard Kennedy School penned an article in June 2017 saying that the soda tax idea has the potential to spread into Democratic-leaning major cities. Because the measures are a relatively new policy idea, there’s plenty of unanswered questions about how well they’re working.

“As a result of the tax do you switch to other unsweetened beverages? Do you reduce overall consumption?” asks Sara Cooper, a research with the Community Epidemiology and Program Evaluation Group, a research arm of both the Colorado School of Public Health and the University of Colorado Cancer Center.

Along with economist David Frisvold at the University of Iowa, Cooper is overseeing studies that look at how beverage distributors move the tax burden through the supply chain, and how people react to the higher prices.

That’s key in assessing whether the tax is achieving its goal, Cooper says. It’s critical to know whether the higher price forces a switch in behavior. They’ll be looking at whether Boulderites just drive to other close-by cities without the tax to pick up a 2-liter bottle of Pepsi or a case of kombucha and smuggle it back in. Their study will compare Boulder’s sugary drink consumption to nearby Fort Collins -- a city without a sugary drink tax -- as a control.

A study of Berkeley’s tax showed a 20 percent drop in consumption of sugary drinks after the city’s tax started. It’s unclear how Boulder’s tax will impact behavior.The Daily Camera’s Alex Burness says they’re still in an experimental phase.

“The idea of a soda tax is to change behavior,” he says. “It’s to tell people, ‘Your soda costs more, so you better think twice about buying it now.’”