Recently, the Arizona State Senate unanimously passed House Bill 2484, a bill which would prevent localities from imposing targeted taxes on soda, snacks, and even meat. HB2484 is now headed to Governor Doug Ducey (R) for a signature. ATR applauds the efforts of the legislature to protect consumers and taxpayers from harmful taxes at the local level.
The bill ensures that Arizona consumers face a uniform level of food taxation across the state, rather than a patchwork of punitive taxes varying by city and county. This uniformity is key to providing a stable tax environment to attract business investment and ensure consumers are not targeted based on the food or beverages they buy or the city they reside in.
The bill was precipitated by a well-funded effort by special spending interests to lobby local governments to target disfavored beverages and food with punitive taxes. Over the past several years, multiple cities and counties have enacted these taxes. These experimentations have provided definitive proof that these regressive taxes eliminate jobs, harm consumers, and are completely ineffective at reducing obesity.
For example, the city of Philadelphia enacted a 1.5 cents an ounce tax on sweetened beverages, mostly targeted to reduce soda consumption. An Oxford Economics study found the tax caused 1,200 people to lose their jobs and GDP decreased by $80 million.
However, the tax did not reduce consumption of sugary beverages. Although sales of these beverages fell 29% within Philadelphia, they rose 26% in communities surrounding the city. This indicates Philadelphians simply traveled to surrounding localities without the tax to buy beverages and other groceries.
The city of Berkeley, California implemented a similar tax on sweetened beverages. The tax actually ended up increasing the number of calories consumed, the exact opposite of what was intended.
These regressive taxes hurt lower income people the most. Food taxes are about four to five times as high for lower income families then upper income families.
Finally, small businesses and grocery stores also face revenue loss. After Philadelphia’s tax was enacted, 88% of affected businesses reported revenue losses due to the imposition of the tax. The tax may contribute to the creation of “food deserts,” low income neighborhoods, often in urban areas, that lack grocery stores. By driving down already low sales, targeted food taxes could lead to the expansion of food deserts in more struggling communities.
ATR strongly applauds the effort of the Arizona legislature to protect consumers, workers, and businesses from these targeted food taxes.