D.C.'s Plastic Bag Tax Has Mixed Results

March 18, 2011

On New Year's Day 2010, Washington, D.C., implemented a "sin" tax of $0.05 on plastic bags.  The purpose of said tax was to raise $3.5 million for the cleanup of the Anacostia River.  Officials claimed that up to half of the trash found in the Anacostia River was discarded plastic bags.  Thus, the plastic bag tax was supposed to encourage shoppers to literally clean up their act, while raising money for other environmental efforts, says David Godow, a research assistant at the Reason Foundation.

Now, a year on, results from the tax are starting to file in.

  • District sources now openly confess the tax brought in nowhere near $3.5 million -- a little over $2 million is nearer the mark.
  • Part of that might be because the tax worked too well by discouraging the consumption of plastic bags.
  • The Director of the D.C. Department of the Environment claimed that 2010 saw only a third of the previous year's total of plastic bags fished out of the Anacostia.

This highlights the silliness of the dual mandate most sin tax's experience: both reducing consumption and raising revenue.  To be fair, D.C.'s bag tax was not implemented specifically as a revenue raiser; tax proponents can still claim victory due to the potential positive effects the levy has had on pollution in D.C. waters.

But in doing so, proponents would overlook some of the unseen costs of the tax.  In a study analyzing the tax's economic effects, the Beacon Hill Institute found that the tax will kill economic activity in D.C. by making people allocate some of their income to the bag tax, or otherwise shop elsewhere.  They estimated the tax would cost the District 101 jobs and reduce gross personal income by about $5.6 million.

Ultimately, a nickel tax on plastic bags will probably not make or break the economic fortunes of D.C.  But the tax provides an interesting example of how governments are increasingly willing to use taxes as a weapon to combat perceived social ills, says Godow.

Source: David Godow, "Mixed Results for D.C. Sin Tax on Bags," Reason Foundation, March 16, 2011.

For text:

http://reason.org/blog/show/mixed-results-for-dc-sin-tax-on-bag

 

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