Creekside Chat: Senate

NOTE: Updated 28-FEB-2013 with updated Senate Bill number.

California State Senator Bill Monning (Democrat, 17th Senate District) re-introduced his controversial soda tax (SB 229 and previously AB 669), which would levy a $0.01 per ounce tax on every beverage sweetened with a caloric sweetener such as sugar or corn syrup.

Okay, let's do a little math to see the total effect of this proposed legislation.

Johnny buys a 12-pack of 12-ounce cans of regular Coke for $3.60, on sale from a supermarket in Capitola, California. How much, per can, will Johnny pay?

Divide $3.60 by 12 cans and you find that each can of Coke costs $0.30.

Now add $0.05 per can for the California Redemption Value (CRV), just for the privilege of using a bottle or can in California.

Now add the appropriate sales tax. The sales tax in Capitola is 8.5% and it applies not only to the cost of the can but also the CRV. The CRV is NOT a deposit, as commonly thought. It is a government fee subject to tax. Therefore, the sales tax applies to $0.30 for the soda plus $0.05 for the CRV. 8.5% of $0.35 is $0.03.

Because regular Coke is sweetened with a caloric sweetener, add Assemblyman Monning's $0.01 per ounce tax for the 12 ounce can. This adds $0.12 per can.

What's the total cost for each 12 oz. can of regular Coke?

$0.30 for the can of Coke
$0.05 for the California Redemption Value (CRV)
$0.03 for the 7.5% California sales tax plus the additional 1.00% Capitola sales tax
$0.12 for Bill Monning's soda tax (SB 229 / AB 669)
=====
$0.50 total cost for the can of Coke

For that $0.50 can, Johnny paid $0.30 for the Coke and $0.20 in taxes and fees. Put another way, 60% of Johnny's money went to pay for something he actually wanted while 40% went to fund the California Nanny State.

The $0.30 can of Coke costs 67% more once government taxes and fees are applied. The soda tax adds 32% over today's current cost, which would not include the soda tax.

Never mind that California ALREADY has ...

the nation's 1st, 2nd, 3rd, 5th, and 7th highest state income tax rates thanks to Proposition 30
the nation's highest state sales tax rate thanks to Proposition 30
the nation's 2nd highest gasoline and diesel taxes

Naturally, beverage companies fear that the additional taxes will cut demand, which is the stated purpose of the legislature. I have little sympathy for the Coca Cola Company or PepsiCo, who spent a combined $3.7 MILLION to support tax increases on all Californians via Proposition 30.

It appears that beverages sweetened with non-caloric sweeteners are unaffected (at least so far). There are also dozens of possible loopholes, potentially leading to some very interesting new product offerings by the beverage industry to circumvent the tax.

Also, as pointed out by @TrollColors in response to this piece, retailers will likely adjust the price of sugary and diet sodas to maximize their profits. The extra $0.12 tax on sugary sodas allows retails the ability to increase prices on diet sodas while still keeping below the sugary soda price. This action will increase their profits.

One also wonders whether the California Legislature will disallow welfare recipients from purchasing sugary sodas using EBT cards. In the past, the California Legislature refused to ban tobacco purchases using EBT cards, despite that the California government also collects heavy taxes to combat cigarette use.

See also ...

SB 622: Sweetened Beverage Tax for Children's Health Promotion Fund
http://leginfo.legislature.ca.gov/faces/billNavClient.xhtml?bill_id=201320140SB622
AB 669: Sweetened Beverage Tax for Children's Health Promotion Fund
http://leginfo.legislature.ca.gov/faces/billNavClient.xhtml?bill_id=201120120AB669

[updated 24-OCT-2010]

While listening to The Jerry Doyle Show via the web from a Las Vegas radio station KDWN, I heard a political advertisement from a supposed Tea Party group against Nevada Senate candidate Sharron Angle and supporting another candidate named Scott Ashjian. The group called themselves The Patriot Majority PAC, which certainly sounds like a Tea Party organization. According to the Las Vegas Review-Journal, The Patriot Majority has spent over $831,000 against Sharron Angle as of October 15, 2010.

Here is an audio clip of the ad, although this one is slightly different than the one that I heard. This is the raw feed, including the preamble information probably used by the radio station.

Having never heard of the group, I searched for them on OpenSecrets.org. I found little available yet, except for a blog post, describing the organization (look for the group's logo). OpenSecrets.org also lists the independent expenditures so far. There is a well-funded 527 organization with a similar name with significant contributions in 2010 and 2008 from AFSCME and SEIU.

Okay, so now it's off to the Federal Elections Commission (FEC) web site.

According to required financial disclosures, The Patriot Majority PAC received nearly $2 million as of 23-OCT-2010.

Looking through the FEC disclosures, I find the following major contributors of $10,000 or more.

1. SEIU Committee on Political Education (COPE): $400,000

2. American Federation of Teachers (AFT): $300,000

3. Guy David Gundlach: $300,000

4. MGM Resorts and MGM Mirage: $300,000

5. VoteVets.org Action Fund: $250,000

6. American Association for Justice (AAJ PAC): $100,000

7. Clean Energy Fuels Corporation: $75,000

8. Harrah's Operating Company: $75,000

9. Carpenter's Legislative Improvement Committee, United Brotherhood of Carpenters and Joiners: $60,000

10. San Pablo Lytton Casino (San Pablo, CA): $50,000

11. Laborers' International Union of North America (LIUNA) PAC: $20,000

12. Sheet Metal Workers International PAC: $10,000

According to FEC filings, The Patriot Majority PAC "committee will not use those funds to make contributions, whether direct, in-kind, or via coordinated communications, to federal candidates or committees." It's funny how everybody aware of the system knows that this is baloney.

Let's look again at the major donors. More than a few are associated with major labor unions that are listed on the OpenSecrets.org list of major political donors, known as the Heavy Hitters list. Here are a few examples.

Service Employees International Union (SEIU) is #11 on the Heavy Hitters list with 95% of their contributions going to Democrats.
American Federation of Teachers (AFT) is #13 on the Heavy Hitters list with 98% of their contributions going to Democrats.
American Association for Justice (AAJ) is #6 on the Heavy Hitters list with 90% of their contributions going to Democrats.
United Brotherhood of Carpenters and Joiners is #12 on the Heavy Hitters list with 89% of their contributions going to Democrats.

What about individual donors? Do they primarily donate to Democrats?

According to OpenSecrets.org, Guy David Gundlach, who gave $300,000 to The Patriot Majority, also gave $2,400 to Harry Reid's campaign (the maximum legally allowed) and $10,000 to the Democratic Party of Nevada. Harry Reid is the incumbent Senator in Nevada running against Sharron Angle. A person of the same name also gave $2,400 to Nevada Congresswoman Shelley Berkley, a Democrat, but the donation was from a California address. Likewise, Guy David Gundlach also gave $12,400 to the Reid Nevada Fund (see page 28, first contributor).
According to OpenSecrets.org, VoteVets.org gives exclusively to Democrats in 2010 and primarily to Democrats in 2008.
According to Influence Explorer, Clean Energy Fuels Corporation gives primarily to Republicans, but has supported Harry Reid.
According to Influence Explorer, Harrah's Entertainment, which may be different than Harrah's Operating Company, is a major contributor to Harry Reid.
According to Influence Explorer, MGM Mirage was a major donor to both Senator Harry Reid and Congresswoman Shelley Berkley, although their political contributions were fairly evenly balanced between parties.
One strange member of the list is the San Pablo Lytton Casino in California, which is apparently part of the Lytton Rancheria Of California. I'm not sure what interest they have in this fight other than the casino owners obviously have connections to Nevada casinos.

I also looked up to see who owns the web domain for The Patriot Majority.

http://www.whois.net/whois/patriotmajority.us

The site is registered to "Craig Varoga" with an "independentstrategies.com" E-mail address. Craig Varoga is also the Treasurers name for the FEC filings. Who is Craig Varoga? According to the Independent Strategies web site ...

http://www.independentstrategies.com/page.php?id=94510

Craig Varoga is a national political strategist whose presidential experience includes managing former Iowa Governor Tom Vilsack’s campaign for president, serving as national field director for retired Four Star General Wesley Clark, managing the Texas Truth Squad in 2000 and running the state-research program for the Clinton-Gore re-election. ... During the 1990s, Varoga served as communications director to Senator Harry Reid .... Partner at Varoga & Associates and founder of the Patriot Majority, Varoga writes a monthly column ("Ask the Campaign Doctor") for Campaigns & Elections magazine.

But still, who is Craig Varoga? According to a Michelle Malkin post from April, 2010.

Before them, it was Craig Varoga--a shady Democrat political operative and overseer of a convoluted, money-shuffling web of 527s. He launched TheTeaPartyisOver.org in January to target Republicans who supported the Tea Party movement and to prevent the "radical" and "dangerous" fiscal accountability agenda from "gaining legislative traction."

Joseph Abrams also wrote about Craig Varoga and friends back in February, 2010.

Here's how it works: What appears like a local groundswell is in fact the creation of two men -- Craig Varoga and George Rakis, Democratic Party strategists who have set up a number of so-called 527 groups, the non-profit election organizations that hammer on contentious issues (think Swift Boats, for example).

Varoga and Rakis keep a central mailing address in Washington, pulling in soft money contributions from unions and other well-padded sources to engage in what amounts to a legal laundering system. The money -- tens of millions of dollars -- gets circulated around to different states by the 527s, which pay for TV ads, Internet campaigns and lobbyist salaries, all while keeping the hands of the unions clean -- for the most part.

...

And this whitewash is entirely legal, say election law experts, who told FoxNews.com that this arrangement more or less the norm in Washington.

"It's not illegal but it is, I think, dishonest on the part of the organizations," said Paul Ryan, a legal counsel at the Campaign Legal Center. "And there's a reason they do it: they know voters don't like outsiders coming in to sway the vote."

...

Outside of that firm, the center of their activity appears to be a single office in Southeast D.C. -- 300 M Street, Suite 1102 -- which plays host to a sprawling political shell game they have established.

Public records show at least seven political shops listed in Suite 1102, most of which are essentially clones of one another, but all of which have offered money -- from measly thousands to game-changing millions -- in state-level elections across the country:

The American Public Policy Committee [2010 donations | 2008 donations ]

Patriot Majority [2010 donations | 2008 donations ]

Citizens for Progress [2010 donations | 2008 donations ]

Oklahoma Freedom Fund [ 2008 donations ]

Mid Atlantic Leadership Fund [2010 donations ]

Public Security Now [ 2008 donations ]

Pioneer Majority [ 2008 donations ]

Bluegrass Freedom Fund [ 2008 donations ]

The APPC, which developed the anti-tea party ads, has gotten all of its money for 2010 from Patriot Majority and from Citizens for Progress, which is also called Patriot Majority West.

The 300 M Street, Suite 1102, Washington DC address appears to be the current address for political law firm Sandler Reiff & Young and for business law and litigation firm Shapiro Sher Guinot & Sandler. The "Sandler" in both firms are cousins Paul Mark Sandler of Shapiro Sher Guinot & Sandler and Joseph E. Sandler of Sandler Reiff & Young. Paul Mark Rosen of Shapiro Sher Guinot & Sandler has been involved in high-profile campaign law cases.

USA Today: "Feds probe for Clinton campaign violations", October, 2004.

Talk about Astroturf, I'm calling this one TOTALLY BUSTED! on The Patriot Majority. By all measures, this is a sham Tea Party group and is purposefully deceptive. Anybody from The Patriot Majority care to refute these findings? For you Sarah Palin fans, refute means refudiate. :-)

Source Data

(link to table)

See also ...

NEW: OpenSecrets.org, "Shape-Shifting by Liberal Dark Money Groups Seems Meant to Confuse"

Center for Public Integrity, "Craig Varoga"

Las Vegas Review-Journal, "Reid distances himself from group attacking Lowden"

Las Vega Sun, "Pro-Harry Reid group out with radio ad touting Scott Ashjian"

Politico, "Casinos place bets on Reid"

DC Independent Examiner, "When Astroturf is really Astroturf: phony grassroots PAC reveals massive 527 network"

Washington Examiner, "Want to know how to really astroturf a movement? Just ask Democrat money men Craig Varoga and George Rakis"

Washington Post, "Democratic group targets tea party candidates"

FoxNews.com, "Anti-Tea Party Web Site Part of Scheme to Funnel Funds"

Las Vegas Review-Journal, "Reid, Angle even on campaign cash"