Plastic bags: Untapped tax gold mine?

Plastic bags have been taxed in Washington, D.C., since January, bringing the city nearly $1 million for river cleanup. But can a bag tax bring revenue in the long term?

By , Correspondent

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    Plastic bags: untapped revenue potential? Washington's plastic bag tax has brought the city almost $1 million. It also significantly decreased the use of plastic bags. In this file photo, a car drives past a plastic bag lying on an on-ramp to Highway 70 near Olivehurs, Calif., June 2. The California Assembly passed legislation that would prohibit grocery stores, pharmacies, liquor stores, and convenience stores from giving out free plastic and paper bags. If signed into law, California would be the first state to impose such a ban.
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Plastic bags?

Who knew the lightweight disposable sacks, which millions of shoppers use every day to lug home groceries and take-out, could help states bring in much needed revenue.

At least, that’s what some policymakers have proposed. Only one US city – Washington, D.C. – has successful instituted a plastic bag tax, but at least 13 other states are considering one.

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In its first month, the 5-cent bag tax brought the city about $150,000. Revenues have increased each subsequent month, reaching $226,000 in May, and totaling $942,000 from January through May. The funds have all gone towards efforts to clean up the Anacostia River, which runs through Washington.

While nearly $1 million is not chump change, in the context of that city's $6.1 billion general fund budget, it’s no windfall, either. Perhaps the more significant result of the measure is that plastic bag use decreased sevenfold in the city after its implementation. Only 3 million bags were distributed in January (the first month of the tax) compared with 22.5 million per month in 2009.

The same was true in Ireland – the only country to institute a plastic bag tax, back in 2002. Plastic bag use dropped 94 percent within weeks of its passage.

So, ultimately, if the tax does decrease plastic bag use, aren't tax revenues dropping, too?

“[The tax is] weird in that it has these two opposite goals,” says Joseph Henchman, director of state projects with the Tax Foundation, a Washington-based think tank.

“The net result is that no matter what happens, someone will claim victory,” Mr. Henchman adds, since the measure is applauded if it does bring in revenue; and if it doesn’t, and succeeds instead in curbing a behavior seen as negative (like pollution and littering resulting from plastic bag use).

The plastic bag tax represents an expansion of so-called sin taxes, which have existed, in some form, since George Washington’s whiskey tax.

This year, several states have increased sin taxes, especially cigarette taxes, to raise revenues. But more plastic bag taxes seem unlikely – two cities, Fairbanks, Alaska, and Seattle, Wash., have both repealed plastic bag taxes shortly after approving them in recent years.

Plastic bag bans, on the other hand, could see success. San Francisco was the first American city to institute a plastic bag ban in 2007, and other smaller citites have followed suit. California got one step closer to approving a statewide plastic bag ban Monday, when the measure passed the Senate Environmental quality Committee. The ban passed the California State Assembly earlier in June.

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