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Beverage industry douses tax on soft drinks

The idea had been floated as a way to finance a healthcare overhaul while combating obesity. But the industry has lobbied key lawmakers and financed scientific studies favorable to its position.

February 07, 2010|By Tom Hamburger and Kim Geiger
  • Beverage firms launched an intense lobbying effort, including a $10-million TV ad campaign, warning against the dangers of taxing food as a House committee considered the measure.
Beverage firms launched an intense lobbying effort, including a $10-million… (Sarah Meghan Lee / For The…)

Reporting from Washington — Employing a broad-based lobbying effort, the soft drink industry has smothered a plan to tax sugared beverages -- a plan advocates said would have reduced obesity and helped finance healthcare reform.

Only months ago, public health advocates thought the tax would be a natural for congressional Democrats looking for revenue to fund expanded health insurance coverage. The soaring costs of treating ailments related to excess weight -- including diabetes and heart disease -- added urgency to the issue.

But the White House staff reviewing funding options never embraced the idea even after President Obama expressed interest last summer. A key congressional committee, after initially seeming receptive, ended up refusing to consider it. Several minority advocacy groups, including some committed to fighting obesity, lined up against the tax after years of receiving financial support from the industry.

There is no sign that First Lady Michelle Obama will mention taxes Tuesday when she unveils her new healthy-eating initiative, which had input from fast food and soft drink representatives.

Meanwhile, beverage lobbyists attacked some of the country's most distinguished nutrition scientists, accusing them of bias and distorting available evidence. The beverage industry also financed research that reached conclusions favorable to its position.

No one underestimated the difficulty of getting new taxes approved, but Rep. Linda T. Sanchez (D-Lakewood), a member of the tax-writing House Ways and Means Committee, said, "We thought we had a chance to punch through."

That was before the industry unlimbered its guns.

Target lawmakers

From the beginning, fast food and beverage company executives were uneasy about President Obama. He and his wife were known advocates of healthy eating. The executives were also concerned that the promised Obama healthcare initiative might include taxes or other incentives to reduce consumption of fast food and high-calorie beverages.

Coupled with similar initiatives in such states as California, the industry faced the possibility of a full-scale national debate on sweetened soft drinks and their effect on health -- and the nation's ever-higher medical bill.

Another alarm sounded last May, when the Senate Finance Committee heard testimony from public health advocates who proposed using a soda tax to help finance healthcare legislation.

Analysts at Yale University have calculated that a penny-an-ounce tax would induce a 23% drop in consumption, and the Congressional Budget Office has estimated that a smaller tax could raise $50 billion over 10 years. Although the extent to which such a tax might drive down obesity rates is scientifically unclear, nutrition experts argue that it would, at the least, improve health by discouraging consumption of sodas, which have no nutritional value but are packed with calories.

A few weeks later, soda tax advocates in the House Ways and Means Committee reported initially favorable responses from colleagues during closed-door meetings. And in July, President Obama told a Men's Health magazine reporter that such a tax was an "idea that we should be exploring."

Sanchez, who was recently diagnosed with gestational diabetes, was one of the committee members who pushed for consideration of the idea. She told a closed-door meeting of committee Democrats that it would be a political winner: "We are on the moral high ground here," she said. "We can improve health outcomes and get more revenue."

At the beginning, several other Democrats expressed support, including six-term Rep. Bill Pascrell Jr. of New Jersey and freshman Rep. Allyson Y. Schwartz of Pennsylvania, the daughter of a dentist.

Beverage lobbyists immediately went to work, enlisting other industries to help pressure members of Ways and Means.

"The industries in our coalition realized that this is a slippery slope, that once government reaches into the grocery cart, your business could be next," said Kevin Keane, senior vice president, public affairs, for the American Beverage Assn.

The coalition, operating under the name Americans Against Food Taxes, included the soft drink makers, their suppliers, and such mass-marketers as McDonald's and Domino's Pizza.

Using the argument that higher food and drink taxes would unfairly burden the poor, the coalition recruited a bevy of Latino groups, among them the Hispanic Alliance for Prosperity Institute, the National Hispana Leadership Institute and the League of United Latin American Citizens.

Public health analysts were surprised to find that the list included the National Hispanic Medical Assn., which represents 36,000 Latino doctors and focuses on health issues, such as obesity-related diabetes, that hit Latino youth especially hard.

"Why in the world would a Hispanic health advocacy group do this?" asked Kelly Brownell, the director of Yale University's Rudd Center on Food Policy and Obesity.

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