Money pours into ballot race

Backers of an initiative to repeal Washington's new beverage and candy taxes are pitching the issue as a fight about government control in the supermarket — talking about meats, vegetables and other foods.

"I think people understand that this is a dangerous precedent," said Kathryn Stenger, spokeswoman for the Yes on 1107 campaign. "The government is reaching into their grocery carts."

But financial backing for the ballot measure suggests the food industry isn't the one that's worried. All but a fraction of 1 percent of the money raised to fight the taxes was put up by a single group: the soda industry.

The American Beverage Association (ABA), which represents soft-drink, sports-drink and bottled-water makers across the country, has contributed $14.2 million to the campaign.

Even if Yes on 1107 only spent most of that money, the initiative campaign would be the costliest in state history. The campaign against the initiative has reported raising about $320,000.

"That ($14.2 million) is equivalent to a very contentious gubernatorial campaign or U.S. Senate race," said Rep. Ross Hunter, D-Medina, chairman of the House Finance Committee, who helped put together the state budget this year.

As of last week, all other contributors combined had given the Yes on 1107 campaign less than 1/10th of 1 percent of that total — about $12,000 in cash and in-kind contributions.

The Legislature this year added a temporary tax of 2 cents on each 12-ounce can or bottle of carbonated beverages, reinstated a temporary sales tax on bottled water, agreed to tax candy, and raised business-and-occupation taxes on some processed foods.

The increases were part of nearly $800 million in taxes to help plug a $2.8 billion hole in the state budget.

I-1107 backers argue the taxes are bad for local food producers.

"We have food companies that will see their taxes go up because they have meat, fruits and vegetables in them," said Stenger, initiative spokeswoman. She pointed specifically to Seattle-based Krusteaz, a Continental Mills brand that produces bread, muffin and pancake mixes, which she said would see a tripling of its B&O taxes.

But John Heily, CEO and president of Continental Mills, was surprised to hear his company touted as an argument for supporting the initiative.

"We are not affected by that tax or Initiative 1107," Heily said. "We're not affected by this, and have no involvement in it. I'm not playing any role at all."

Food portion of tax

The food portion of the Legislature's tax changes actually narrowed a B&O tax exemption that lawmakers originally meant to apply only to meatpackers. In 2005, the state Supreme Court ruled the exemption also could be used by makers of prepared foods that use meat, such as canned chili. I-1107 again would expand that exemption.

The Legislature also clarified — just in case — that an existing lower B&O tax rate for providers of fresh fruits and vegetables wouldn't apply to companies such as Krusteaz that use berries in products. But neither Krusteaz nor other food manufacturers had ever tried to use that lower rate.

While narrowing the tax exemptions would generate nearly $19 million over five years, the Legislature's new candy, soda and bottled-water taxes would raise — or cost consumers — more than $400 million. But the initiative fight is really about soda.

ABA representatives declined several requests for interviews and referred all calls to initiative spokeswoman Stenger. Asked why the industry gave so much, Stenger said, "That's a question for the American Beverage Association."

But health advocates and state lawmakers who participated in budget negotiations aren't at all surprised.

"I knew we'd have a nationally funded campaign against the pop tax. They (the industry) told us they were going to do it," Hunter said. "They have concerns that the federal government and other states might propose other pop taxes if it starts to look successful in a number of states."

The ABA long has been opposed to increasing soda taxes, but the group began waging lobbying campaigns on several fronts in 2009. That's when state and local governments began feeling the effects of the recession. It's also when health advocates argued in the New England Journal of Medicine that increasing soda taxes could help reduce America's obesity epidemic.

ABA spent millions lobbying Congress when lawmakers considered soda taxes to help pay for the federal health-care overhaul. The city and state of New York have tried and failed to adopt special soda taxes. So have Washington, D.C., and Philadelphia. Several other cities and states are still trying.

But Colorado this year was among the first to add a new tax on pop and candy.

"We opposed the bill from Alpha to Omega, but we lost," said Chris Howes, with the Colorado Beverage Association. "As you can imagine, we didn't like being singled out."

Washington now is the only state where the ABA is taking the fight to voters, but few believe it will be the last.

"They're worried about a domino effect, like with tobacco," said Michael Jacobson, with the advocacy group Center for Science in the Public Interest, which supports soda taxes. "They think if Washington does something small, Oregon would do something larger, and God knows what those Californians might do."

Arguments about tax

There are plenty of arguments about the appropriateness of soda taxes. Opponents claim it's unfair to single out one form of cheap calories; many sugary foods consumed to excess can contribute to obesity.

They also maintain that data about whether a soda tax reduces consumption are mixed, while it clearly does hit lower-income consumers harder.

Other opponents, such as the Washington Policy Center, a conservative think tank, support the initiative on principle. The policy center argued the state shouldn't raise taxes to solve its budget crises. The Washington State Republican Party also supports I-1107.

While Hunter, a Democrat with two soda-pop bottling facilities in his district, is no fan of I-1107, he said he only voted for the soda portion of taxes as a last-minute compromise.

"I don't want us to wind up being a nanny state where we say, 'Oh, this pop is bad for you, so we should discourage it,' " he said. "It's just not that bad for you. Yes, drunk to excess, soda is bad. But that's true of a lot of things. I don't think it's an appropriate tool to try and affect health care."

A 2010 Rand Corp. study suggested that small increases in soda taxes don't alter consumption at all. But the organization said soda taxes could affect obesity if money is dedicated to anti-obesity programs.

Washington's tax goes to the general fund, although Hunter said without it many programs for low-income families would have been cut.

Still, supporters of soda taxes argue that they make sense. There's some evidence that higher taxes, in fact, may reduce consumption.

"If you tax sugared beverages, it's a public-health home run," said Kelly Brownell, a Yale psychologist who runs the Rudd Center for Food and Policy, a chief national campaigner on behalf of soda taxes. "If it's used for obesity programs, it's a grand slam."

Stenger, spokeswoman for the initiative, said her concern is ending the taxes. For that, she's thankful she has money to work with — although she won't say how the campaign plans to spend the cash.

"It's important, and this is a big state," she said. "I'm glad we have the flexibility to get our message out."

Craig Welch: 206-464-2093 or cwelch@seattletimes.com