Soda Tax Difficult to Swallow in Berkeley

The city of Berkeley, Calif., is finding it’s not so easy imposing a soda tax. Since the tax’s Jan. 1 imposition, retailers find it’s a burden changing prices for just one type of item in one city.

Measure D, officially the City of Berkeley Sugary Beverages and Soda Tax, last November overwhelmingly was passed by 76 percent of city voters. The tax is a penny per ounce. So a 16-ounce Coke would be hit with 16 cents. There are exceptions for small businesses.

The measure passed even though the soda industry spent $2.4 million against it, an estimated $30 per registered voter. Opponents warned of increased costs to consumers.

The pro-Measure D coalition called itself Berkeley vs. Big Soda. It maintained on its website, “We face a serious health crisis:40% of kids will get diabetes in their lifetimes unless we do something about it. The link between sugary drinks and diseases like diabetes is undeniable.”

Former Labor Secretary Robert Reich, a Berkeley resident, wrote in the Huffington Post in favor of the tax, “Berkeley’s Soda War pits a group of community organizations, city and school district officials, and other individuals (full disclosure: I’m one of them) against Big Soda’s own ‘grassroots’ group, describing itself as ‘a coalition of citizens, local businesses, and community organizations’ without identifying its members.”

The text of Measure D claimed “this Ordinance is to diminish the human and economic costs of diseases associated with the consumption of sugary drinks by discouraging their distribution and consumption in Berkeley through a tax.”

Measure D set up a new bureaucracy, the Sugar Sweetened Beverage Product Panel of Experts, to recommend to the City Council how to spend the taxes collected.

Compliance

But things are turning out more complicated than expected. Camilo Malaver co-owns the San Francisco-based Waterloo Beverages company, reported Berkeleyside. “In January, when the tax was implemented, Malaver decided to stop restocking his supply of craft sodas and naturally sweetened beverages in Berkeley to avoid further confusion. … His frustration was aimed primarily at the city for what he saw as a poor job relaying information on how to comply with the tax.”

Malaver said, “Berkeley is a good city to do business with the university, but now, it’s tough. We’re in limbo. Everybody’s lost and [we] don’t know what to do.” The university itself, as a state entity, is exempt from Measure D.

A problem is that the soda market has changed from the days when the market mainly was such Big Soda suppliers as Coca-Cola and Pepsi. As with the craft brew markets for beer, “craft sodas” have popped up like those sold by Malaver.

When potentially hundreds of different items are involved, that complicates trying to figure out if a beverage is taxed, or is exempt. For example, the ordinance taxes “heavily presweetened tea,” but not regular tea, or slightly sweetened tea.

The big distributors offering a limited number of different drinks more easily can comply than can the small or medium outfits. As Berkeleyside notes, “All but one of the distributors who spoke to Berkeleyside were small- to medium-sized local distributors that sell craft sodas, sweetened teas and energy drinks.”

The confusion over what to tax also is reminiscent of the controversy over the statewide 1991 Snack Tax. As part of a $7 billion tax increase to close the budget deficit of that year, the tax was imposed on formerly exempt snacks. Except that some snacks, such as nuts, remained exempt. But it wasn’t clear whether candy with nuts was taxed, or exempted.

The Los Angeles Times reported in October 1992, “SACRAMENTO — A year and a half ago, part of the answer to the state’s dire need for higher revenue was extending the sales tax to snack foods, candy and bottled water, passed by the Legislature and signed by Gov. Pete Wilson.

“Today, with the signatures of nearly a million Californians standing behind Tuesday’s ballot measure to repeal the tax, no one — not the governor nor a single lawmaker who voted for it — has stepped forward to support keeping the tax.”

On Nov. 3 that year, two-thirds of voters backed Proposition 63, which repealed the tax.

Dollar Tree

Meanwhile, one large outfit affected by the Berkeley soda tax is discount chain Dollar Tree. A 16-ounce soda formerly cost $1, plus Berkeley’s 9-cent sales tax. (In California, sodas are taxed, unlike most other food). Now on top of that is placed the new soda tax of 16 cents (1 cent per ounce). Total: $1.25.

Berkeleyside reported in January, “Dollar Tree — which sells a variety of products for $1 or less and has more than 5,200 stores in North America — decided to pull out sodas in its Berkeley stores when the soda tax went into effect on Jan. 1, according to Randy Guiler, vice president of investor relations.”

Guiler said, “Due to the increased cost from the Berkeley sugary drinks and soda tax, we are no longer able to carry sugary drinks and soda at the one-dollar price point.”

Ironically, Dollar Tree still sells fruit juice, even when it is saturated with sugar, because the beverage is not subject to the new tax.

Future taxes

A 2013 bill for a statewide soda tax, SB622, died in committee. It was by state Sen. Bill Monning, D-Carmel. According to the March 2 Sacramento Bee, it’s unlikely to come back in the Legislature any time soon.

A tax increase still requires a two-thirds vote in both houses of the Legislature. With Republican gains last year in the Legislature, Democrats’ two-thirds supermajority is long gone. And if there’s one thing Republicans can agree on, it’s opposing higher taxes.

That leaves anti-soda forces hopeful that Berkeley’s example can be poured out into other cities, even though 30 previous tries have failed.

Originally published by CalWatchdog.com

UC Berkeley Slammed Over Allegedly Biased Minimum Wage Report

A top researcher has called out University of California, Berkeley for allegedly releasing a biased research paper that served as leverage for the San Francisco minimum wage increase.

Economic expert Michael Saltsman, research director at the Employment Policies Institute, argues that a biased research paper by UC Berkeley helped lead residents of San Francisco to support a rapid minimum wage increase, which possibly contributed to several businesses closing. As Saltsman argues, the wage increase makes the cost of operations a much worse burden for business owners. They often have to cut hours or even in some instances completely close their business.

The paper, “San Francisco’s Proposed City Minimum Wage Law: A Prospective Impact Study,” was released in August, and argued that an increase of the minimum wage will have a vastly positive impact for workers in the city.

“Drawing on a variety of government data sources, we estimate that 140,000 workers would benefit from the proposed minimum wage law, with the average worker earning an additional $2,800 a year (once the law is fully implemented),” the study noted. “Our analysis of the existing economic research literature suggests that businesses will adjust to modest increases in operating costs mainly through reduced employee turnover costs, improved work performance, and a small, one-time increase in restaurant prices.”

The following November, residents of the city voted to increase the minimum wage gradually to $15 an hour over the course of three years. Saltsman argued the UC Berkeley study used biased findings.

“These are the comforting studies they can turn to,” Saltsman told The Daily Caller News Foundation. “It creates stories that say you can raise the minimum wage without consequences.”

“If you look at the methodology,” Saltsman said. “Basically they didn’t take into account the fact it could have a negative impact on employment.”

Saltsman argued that the study only looked at how the wage increase will benefit workers, as opposed to how it may negatively impact businesses. If a business owner is unable to hire as many employees or has to close their business because of the higher cost of operations, it becomes bad for workers, too.

“These contribute to the public policy debate,” Saltsman continued. “It’s become a key position in the public policy debate.”

Saltsman said their approach and the results of the study are not at all surprising. Some of the researchers involved had activist backgrounds.

“The problem at UC Berkeley is they are presenting themselves as unbiased economists,” Saltsman notes. “This is the sort of thing you expect from an advocacy group.”

Michael Reich, one of the researchers involved in the report, shot back at the claims the study was biased.

“In restaurants and retail, stores both open and close all the time. You’d need to know whether closings increased and openings decreased relative to a control group,” Reich told TheDCNF. “That’s an objective method that all economists, including me, use to identify the causal effects of a policy.”

Though the wage increase has not gone into full effect yet, opponents are already pointing to several businesses that have closed. These include Borderlands bookstore, Abbot’s Cellar, Luna Park and Source.

Follow Connor on Twitter

Originally published by the Daily Caller News Foundation. 

Berkeley Minimum Wage Hike Study Ignores Key Factor

Los Angeles Mayor Eric Garcetti’s proposal for a $13.25 citywide minimum wage hit a speed bump last week when two city councilmen — Mitch O’Farrell and Felipe Fuentes — insisted on an independent analysis of his plan.

They specifically objected to the group of researchers originally chosen to conduct that analysis, from a labor union-aligned research outfit at the University of California-Berkeley, due to concerns that their final product wouldn’t be sufficiently independent.

Are these concerns justified? Berkeley professor Michael Reich, who has accompanied the mayor on pitch meetings for the proposed wage hike, doesn’t think so.

Reich and his co-authors have been busy writing various reports on California minimum wage increases. In 2014, for instance, they released four separate reports on proposed city minimum wage increases in the state — in San Francisco, San Diego, Los Angeles and Oakland — and another report on a proposed statewide wage increase.

The geographies and populations studied varied dramatically, as did the minimum wage policies proposed: From $11.50 an hour in San Diego up to $15 an hour in San Francisco. And in every instance, the conclusion that Reich and his team produced was the same: Substantial loss of entry-level jobs is unlikely to occur following a minimum wage increase. (This consequence was apparently so remote in San Diego that it wasn’t even worth mentioning in the report.)

This kind of unanimity on the question of job loss and the minimum wage is highly unusual, to say the least: The issue has been studied exhaustively over the past two decades, and according to a summary of all these studies by economists at the University of California-Irvine and the Federal Reserve Board, a majority of the research points to job losses following a wage hike.

Policymakers curious how Reich and his team consistently reach a conclusion at odds with this economic consensus should read the fine print. In a seven-page document released last year explaining how they estimated the impact of citywide minimum wage increases, they offered this disclaimer: “We do not make any adjustments for potential positive or negative changes in employment due to the minimum wage increase.”

Got that? The reason why this team from UC-Berkeley consistently finds no impact on employment from a higher minimum wage is that they assume at the outset it doesn’t exist.

You could have all sorts of fun evaluating public policies following this approach. For starters, you might study the increased revenue from a new 50 percent tax on all new car purchases in Los Angeles — and assume at the outset that higher taxes won’t affect consumers’ purchasing decisions. Or perhaps you could study the ramifications of a $20 per-car toll on the Golden Gate Bridge — and assume from the start that higher tolls won’t impact driving habits. In both cases, you’re guaranteed to succeed!

Of course, if the assumptions are unjustified — if higher taxes on cars really would reduce purchases, for instance, and if a higher minimum wage really could hurt job growth — then this approach starts to run in to trouble.

It’s even more problematic in the case of Reich’s team at UC-Berkeley because the backgrounds of these researchers suggest they have more than the data in mind. Ken Jacobs, for instance, who was a co-author on all four of the city minimum wage studies, was formerly employed as co-director of the San Francisco Living Wage Coalition. Today, he oversees the Center for Labor Research and Education, which is supported by many of the same unions pushing for a higher minimum wage. Another co-author of these papers, Annette Bernhardt, made the leap to Berkeley from the National Employment Law Project , which boasts of “coordinating the campaign to lift the federal minimum wage to more than $10 per hour.”

The least that the City Council can do is commission a report whose independence is not in doubt. With an average 30 percent of Los Angeles’ job-seeking youth failing at finding a job, it’s crucial that any additional barriers to employment associated with a higher minimum wage be seriously examined rather than ignored as if they didn’t exist.