Santa Cruz sugary drink tax now in effect — here’s where the tax is going

SANTA CRUZ, Calif. (KION-TV) -- Santa Cruz’s 2-cent-per-ounce tax on sugary beverages officially went into effect Thursday, making it the first city in California to defy a 2018 state law that banned new local soda taxes.

The tax applies to drinks with added sugar and more than 40 calories per 12 ounces, including sodas, energy drinks, and sweetened teas.

City leaders say the measure is about public health and local control.

“We are very excited about implementation of the sugar-sweetened beverage tax. It’s further investment into community health, and we’re a very health-conscious community, so we’re proud and excited, Shebreh Kalantari-Johnson, Santa Cruz City Councilmember, said.

Voters narrowly approved the measure in November, the goal, supporters say, is to reduce sugar intake especially among youth and to fund local wellness programs.

“We see this as a step towards giving people really more options that are healthy and more cost effective,” Kalantari-Johnson said.

Revenue from the tax will be guided by an advisory board made up of public health and education experts.

“Reinvestment, like, for example, our parks, infrastructure or nutrition programming or some things that other communities have done, like clean and safe water fountains at parks,” Kalantari-Johnson added.

But not everyone is on board, The American Beverage Association argues the tax violates state law.

“It defies what the state has passed. That law is enormously popular with voters and citizens because they don't want higher prices on their food. And they’ve joined with labor unions, progressive groups, and many others who are opposed to this law,” Steven Maviglio, spokesperson for the American Beverage Association, said.

Opponents also point to the pressure this places on small businesses, especially those still recovering from the economic impact of the pandemic.

DJ Mini Mart, who recently closed her shop after more than a decade in Santa Cruz, said the tax was another hit her business couldn’t afford.

“We had to try to keep the merchandise at a somewhat reasonable amount so that we could sell the products. And it was just overwhelming,” Debbie Bouchard Owner of DJ's Mini Mart  said.

“Between trying to keep employees at a wage where they could even afford rent around here it’s just crazy. And now one more tax,” Bouchard said.

Still, not all business owners are pushing back. Some, like the owners of health conscious restaurant Charlie Hong Kong, say the tax aligns with their mission and they’ve already removed soda from the menu.

“The soda we were serving had 43 grams of sugar, which is more than double your daily allotment. And although it was popular, we’re a health restaurant that’s our focus. It just felt like the right thing to do,”Carolyn Rudolph owner of Charlie Hong Kong’s owner said.

“It’s an opportunity to rethink maybe what’s being sold in your store,” Rudolph said.

City officials say they’re ready to defend the tax in court, if necessary.

“We are confident that we are within our rights as a charter city to implement a voter-approved tax. If litigation is pursued by the beverage industry, we’re prepared to fight back and we have a coalition of advocates ready to stand with us,” Kalantari-Johnson said.