March 11, 2013

NYC soda ban taxes New Yorkers' patience

By Anastasia P. Boden Attorney

Start spreading the news, soda isn’t leaving today.

Tomorrow was supposed to mark the effective date of New York City’s large sugary beverage ban, which have would prohibited (some) vendors from selling soda in portions greater than 16 ounces.  Restaurants, delis, and other places that prepare food were subject to the ban, while other establishments–including grocery stores and 7-Elevens–would have been free to continue selling the larger sizes. Today a New York judge granted a coalition of beverage makers and minority business owners their request that the Board of Health be enjoined from enforcing the sugary beverage ban.  The ban’s myriad exemptions appeared to especially trouble the judge, who cited the law’s many loopholes in the decision.

The ban, intended to address the purported obesity epidemic, was ill-written and ill-conceived.  First, the “ban” didn’t quite act like a ban.  Because it merely prohibited large single portions, soda-hungry consumers would still have been able to purchase two small cups rather than one large cup–meaning the “ban” would have functioned as a tax.  And even if the tax were to work as a soda deterrent, it may have encouraged consumers to spend their dollars on untaxed sweet treats, including candy, cake, or ice cream.

What’s more, alcoholic beverages, milk-based beverages, and soy milk-based beverages were exempted from the portion ban.  It’s unclear how the Board decided that sugary but alcoholic, sugary but milk-based, or sugary but soy milk-based beverages are any more healthy than straight up soda.  In fact, flavored soy milks are high in sugar, while other milk substitutes like rice and almond milk are equally if not more healthy and were not included as exemptions.

In sum, under the act, if one couldn’t get their sugar fix at a restaurant, they could could have walked across the street and grabbed a big gulp.  If one couldn’t buy a pitcher of soda at a restaurant for a birthday party or celebration, he or she could’ve bought several individual portions.  If one wanted a large sweet tea, he or she could have sweetened an unsweetened tea themself.  Or, if one wanted to avoid the hassle, he or she could have just bought a large frappuccino.

Referencing Boreali v. Axelrod, a state separation of powers case, the judge determined that the ban violated three out of four Boreali factors and thus could not stand.  First, the ban’s many exemptions were based on “economic and political concerns” rather than health concerns, which are properly under the Board’s purview.  Second, the court found that such a measure was not a necessary exercise of the powers the legislature had delegated to the Board; there was not a sufficient danger to justify the ban.  Indeed both parties had agreed that, following a sharp incline, obesity levels were leveling and soda consumption was decreasing.  Third, the Board had acted in an area in which the New York City Council as well as the state legislature had previously tried to act and failed.  Thus, though the Board satisfied the fourth factor–it exercised the requisite skill and expertise in passing the ban–it violated the separation of powers principle.  Alarmingly, the Board had argued that it was not subject to a separation of powers inquiry, to which the court replied, “One of the fundamental tenets of democratic governance here in New York, as well as throughout the nation, is the separation of powers. No one person, agency, department or branch is above or beyond this.”

The court further held that the ban was reasonable, but not rational under Article 78, which permits challenges to actions by administrative agencies.  Once again, the ban’s numerous exemptions troubled the judge, who determined that even under a generous amount of deference, the ban’s consequences were arbitrary and capricious.

One thing the judge neglected to mention was the enormous economic burden the ban would have imposed on soda vendors.  Many vendors had likely already invested significant resources in preparing to comply with the ban.  Those with extra cups larger than 16 ounces may have thrown them out, and surely many had purchased new compliant cups.  The creator of Honest Tea once said that the company “invested several hundred thousand dollars for 16.9 oz. bottle molds.”  In lamenting the ban, he quipped, “Is 16.9 ounces the perfect size? Who knows? As a beverage marketer, we willingly submit to the unforgiving judgment of the market. What we did not anticipate was an arbitrary decision to constrain consumer choice.”  Who knows how much money the company had subsequently invested in preparing to comply with the ban.

But apart from the bill’s legality and economic burden, the bill’s propriety was doubtful.  Allowing individuals, and parents in the case of children, to make their own decisions reinforces the notion that they have responsibility for their actions.  The Department of Health and the Mayor apparently thought they knew better than over half of New York, which opposed the measure.  Individuals are best suited to make these types of decisions.  Food choices are not insignificant; they have religious and cultural dimensions.  But further, they involve financial choices as well, including what products both to buy and sell.

Mayor Bloomberg has said that the ban is meant to help those who are really “hurt” by sodas.  But in his efforts, he hurt individuals’ ability to pursue the profession of their choice, or make economic purchasing decisions of their own.  We can only hope today’s decision will stave off future attempts to impose sin taxes on whatever item Bloomberg next sets his sights on.

 

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