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The Crazy Story Behind Why California Just Banned Soda Taxes

June 29, 2018, 7:56 PM UTC

California has a prominent history as a public health provocateur. The state legalized medical marijuana all the way back in 1996, has pursued stringent environmentally-focused policies (including under Republican governors), and even toyed with classifying coffee as a cancer risk for a hot second (on the latter point, the state’s health department recently recanted).

So a tax on sugary beverages like soda wouldn’t exactly be out of character for local California governments, disagreements about such taxes’ ultimate effect on public health aside. But any cities, towns, or counties looking to put a surcharge on sugary drinks will be out of luck until at least 2030 following the passage of a statewide soda tax ban signed by Democratic Gov. Jerry Brown on Thursday.

Why would Brown, a seeming devotee of aggressive public health measures, put his signature on such a bill—and why would the overwhelmingly like-minded California state legislature approve it in the first place? The answer: A successful, no-holds-barred campaign by the beverage industry and its supporters to nix even the possibility of local soda taxes in exchange for standing down on a controversial tax-related ballot measure.

Here’s what went down, as the Sacramento Bee reports: Major beverage companies like Coca-Cola, PepsiCo, and their trade organization the American Beverage Association backed a ballot measure in California that would have made it extremely difficult to raise local taxes and fees for any reason whatsoever (including non-beverage-centered taxes). The measure would have forced supermajority, rather than simple majority, votes to implement new local and state taxes or raise existing ones. Now that the industry-backed legislation barring soda taxes has passed, the popular referendum measure’s supporters have agreed to pull it from the ballot.

The prospect of such a ballot initiative concerned local government officials who said their revenue-raising capacity would have been hamstrung by the measure, potentially stunting new social programs or any sort of project that required more tax revenue, including balancing budgets.

That’s a sentiment that Brown echoed in a statement following his signing of the bill, which came together in just a matter of days.

“Mayors from countless cities have called to voice their alarm and to strongly support the compromise which this [soda tax ban] bill represents,” Brown wrote, adding that the inability to raise revenue “would be an abomination” for local governments.

“For these reasons, I believe Assembly Bill 1838 is in the public interest and must be signed,” said Brown.

The beverage industry had asserted that their proposed ballot referendum was meant to prevent unfair tax hikes. Its opponents saw it in a very different light.

“This industry is aiming a nuclear weapon at government in California and saying, ‘If you don’t do what we want we are going to pull the trigger and you are not going to be able to fund basic government services,'” said Sen. Scott Wiener of San Francisco, a city with an existing soda tax, according to the local KCBS outlet. Wiener was one of the few lawmakers to vote against the bill banning soda taxes.

Fortune has reached out to the American Beverage Association for comment on the issue. We’ll include an update if it responds.

A handful of cities with existing soda taxes will be able to maintain them going forward, including San Francisco. But any other locales considering such measures will be barred from doing so for the next 12 years.

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