Berkeley Considers Doubling Soda Tax Amid Spending Concerns

Berkeley, California, is considering a proposal to double its tax on sugary drinks, a move that has drawn criticism from local businesses and raised questions about the allocation and oversight of the tax revenue. The city, which pioneered the soda tax in the U.S. in 2014, is asking voters to increase the rate from one cent per fluid ounce to two cents. This comes as businesses report struggling with unmet city services and growing homelessness.

Scrutiny Over Spending

A financial review by the California Post has highlighted potential irregularities in the spending of tax revenue, particularly concerning Healthy Black Families, a nonprofit that has received over $2.2 million since the tax's inception. The organization, which provides community services targeting the African American community, has faced criticism for its financial reporting, including conflicting compensation figures, substantial unexplained expenses, and numerous legal fees in its IRS filings.

An accounting firm partner, Gary Krausz, noted "repeated failures in basic financial reporting" within Healthy Black Families' filings. A retired accounting professor described the filings as "incompetent." In 2024, the nonprofit reported over $300,000 in miscellaneous expenses, about a third of its total spending, without itemization. The previous year, it had nearly $233,000 in unexplained expenses. Krausz also pointed out a lack of independent board members and required policy disclosures from 2021 through 2024.

Other grantees have also drawn attention, with five grants totaling $245,000 allocated to a program for day laborers' "life skills" and nearly $125,000 for a project called "Artists Against Soda."

Business and Community Reactions

Local business owners have voiced frustration over the proposed tax increase. Mustafa Thotta, a manager at Middle East Market & Cafe, stated that Berkeley's taxes have become excessive while critical issues like street conditions, homelessness, and crime persist. He argued that individuals are increasingly aware of their health choices, suggesting that personal responsibility should be paramount.

Julian Cañete, president and CEO of the California Hispanic Chambers of Commerce, criticized the tax, calling it "ineffective" and suggesting it primarily benefits nonprofits. He urged voters to consider the impact on struggling small businesses before approving a tax hike.

The American Beverage Association also opposed the increase, stating that higher taxes on beverages burden working families and small businesses without demonstrably reducing consumption or obesity. They argue that such taxes disproportionately affect lower-income individuals.

Mixed Health Outcomes and Tax Precedent

Berkeley's soda tax has served as a model for similar levies in other U.S. cities, though studies on their effectiveness have yielded mixed results. While some research indicates a link between soda taxes and reduced sugary drink sales, concrete evidence of significant health benefits remains debated. A 2024 study on prediabetic adults in California found no significant reduction in new diabetes cases following the implementation of these taxes. Another study of adults in four taxed California cities showed no overall improvement in body mass index, though some demographic groups and Berkeley itself saw modest reductions.

Conversely, Xavier Morales, executive director of The Praxis Project and a member of Berkeley’s soda-tax advisory panel, defended the tax's impact, citing research suggesting a recent drop in body mass index among Berkeley children and asserting that funds have been used as promised to voters. He stated he was unaware of any waste.

Berkeley voters will decide on Measure AA by November 3rd, which would convert the current general tax to a special tax specifically for health, nutrition, and water access programs. The proposed measure includes provisions for grant disclosures, performance requirements, audits, and fund recovery mechanisms.