September 4, 2013

Lawmakers may not like to admit it, but taxes and behavior modification go hand-in-hand. If the government wants a behavior changed, they tax it. Think in terms of tobacco use, fuel-efficient vehicle credits, and home energy improvement credits. Now, there’s the bag tax.

So far the bag tax has only passed in a few areas like Washington D.C. and Seattle. Originally Seattle wanted a 20-cents-per-bag tax, but realizing the measure would fail, they came down to a nickel-a-bag. New York City and the states of Maryland and Florida saw similar proposals, which failed. Now, Pennsylvania state Senator Daylin Leach hopes to pass the first statewide measure, adding a two-cents per plastic bag tax.

According to Leach, an average family uses 15 bags a week, which means his bag tax would add 30 cents/week to their cost. That, he told reporters, would “encourage consumers to shift away from using inefficient plastic shopping bags” without busting the family budget. Leach was no doubt thinking he’d have to keep the “pain” low to pass the bill. But if the goal is really to change behavior — not raise revenue — keeping the tax affordable seems to defeat the purpose.

Where does the tax revenue go?

Half will go to the retailers to improve recycling programs, and half to the state recycling fund. The more successful the program, the lower the revenue intake, so let’s hope Pennsylvania lawmakers are not counting the revenue to balance their budgets or fund new programs, as other lawmakers have done. Often proponents of new tax crow about how much revenue will be raised, start some new costly program, only to have to eat that crow when the revenue falls below expectations when behavior does modify.

Washington D.C.’s example

D.C. charges five-cents-a-bag at grocery stores, drugs stores, and retail food establishments. There’s no denying the behavior modification works well. In the very first month usage dropped from 22.5 million bags to 3 million. That’s phenomenal. The revenue goes into the Anacostia River Clean Up Fund, which supporters projected would be $10 million over the first four years. But of course, as behavior did modify, the revenue has fallen far short of the projection.

Let’s not forget the added burden of paperwork which accompanies new programs. Businesses must track, calculate and pay the taxes, fill out returns and somehow account for how they used the added revenue to improve their recycling programs. The state will have to add employees, if not a department, to collect and process the returns and the tax and penalize businesses who fall short.

The nation is watching Pennsylvania’s vote on this, as eight other states are considering similar propositions: Hawaii, Louisiana, Maine, New Jersey, New York, Rhode Island, Vermont, and Washington.

The Lesson?

Whatever your thoughts on the use of plastic bags, adding a new tax may fund a worthy cause, but if the goal is truly behavior modification, the revenue will disappoint. And the cost of the added burden on businesses and government offices may eliminate or exceed revenue.

Photo: adav