Author: Holden, Dominic
Date published: August 26, 2010
Journal code: STRR
When I called the campaign office for Initiative 1107 on August 19, I mentioned to spokeswoman Kathryn Stenger during some small talk that I'd just finished eating lunch.
"What a coincidence!" she said. "You are calling about food."
Her point was that I-1107, which is on the Washington ballot this fall, is attempting to repeal a food tax. This serves as the campaign's mantra: The group calls itself Yes on 1107: Stop the Tax Hikes on Food & Bever ages and its official website is www.stopgrocerytaxes .com, which claims that the legislature's "costly and arbitrary new tax increases on food and beverages... hurt middle-income families, seniors, and other people who are already struggling to make ends meet during difficult economic times."
But the vast majority of unprepared foods remain untaxed in Washington State. And while the initiative applies to some things you'd find in a grocery store, they're not the sorts of products you'd make a meal from.
If voters approve it, I-1107 will specifically repeal a temporary two-cent surcharge on every 12 ounces of soda pop and remove a law that temporarily applies the standard sales tax rate to bottled water and candy. (The taxes were part of the legislature's efforts this year to bridge the state's budget gap, thereby saving programs like Basic Health and education funding.)
So this initiative isn't "about food." It's about candy.
But Stenger argues that when the lawmakers created the new taxes on soda, bottled water, and candy, they also tweaked the tax rules for food processors that make products containing less than 50 percent fruit, vegetable, or meat. Those businesses used to receive a discount on their business and occupation tax, but the legislature took that special exemption away, putting them on par with all other businesses in Washington State.
"This affects locally made food products," Stenger says. Processors like Washingtonbased Krusteaz, which makes baking mixes, are affected, and the costs will "hit customers at the checkout," she warns.
How much of this processed food is caught in the net? Stenger didn't know, saying, "Part of the challenge is figuring out the exhaustive list of foods that are affected."
But the state's Office of Financial Management issued a report this summer that found the small rise in food processors' business taxes represented a minute fraction of the initiative's impacts. In 2012, when the taxes would be in full swing (most of them expire in 2013), all the food processors in the state would be paying just $4 million more in taxes. It's clear that the initiative's real goal isn't protecting food processors or consumers-it's the repeal of $42.7 million in taxes on candy, $46.5 million on bottled water, and $41.4 million in taxes on soda.
"They don't think they can win if we had an honest discussion of what this initiative is about," says Sandeep Kaushik, spokesman for Citizens to Protect Our Economic Future, which is opposing the measure. "That is why they have gone to such extraordinary lengths."
Indeed, the backers of I-1107 have entered unprecedented territory. The group reported in mid-August that it had raised $10.2 million, which Lori Anderson at the Washington State Public Disclosure Commission says makes it the most generously funded pro-initiative campaign in state history. Washington has never faced an initiative with this much money to spread its message-a message that is largely disingenuous. And that money isn't coming from a food lobby or food processors or consumers.
It's coming from the soda industry.
Of the $10 million in cash contributions (the rest are in-kind donations), almost all the money comes from the American Beverage Association (ABA), which represents Coca- Cola, Pepsi, and other leading distributors of bottled water and soda. Only $225 came from other sources.
"They don't care about what's best for Washington State families," Kaushik says, referring to the benefits of using those taxes to save state-run health and education programs. He says the group tacked on the foodprocessor tax simply as a means of misleading voters. "They are doing this because they are only interested in protecting their own massive profits," says Kaushik.
As it stands, soda companies enjoy enriched profits thanks to government kickbacks on their primary sweetener. In a report last year from Tufts University called "Sweetening the Pot," Alicia Harvie and Timothy A. Wise wrote that U.S. farm policies gave "high fructose corn syrup producers an implicit subsidy of $243 million a year, a savings of $2.2 billion over the nine-year period, and over $4 billion since 1986."
In recent years, the ABA has increased lobbying exponentially to combat attempts to raise soda taxes. In 2008, it spent about $1 million, according to expenditure trackers at OpenSecrets.org, but last year, responding to taxes on sugary drinks that it has tried to defeat, lobbying contributions shot up to over $19 million. The ABA may see Washington State's new soda tax as a dangerous precedent, one it can't afford to let stand.
Asked whether this latest effort in Washington was an attempt by soda companies to hold back the floodgates and protect their fi- nancial stake here, Stenger said, "I would just go back to the fact that this is about government taxing food."
Sure it is.