Commentary

Mixed Results for D.C. Sin Tax on Bags

On New Year’s Day 2010, yet another innovation in sin tax policy — measures government takes to keep you from buying things it thinks are naughty while raising some revenue for itself — went into effect. That breakthrough tax, the first of its kind in the states, was Washington, D.C.’s excise tax on plastic bags, a $0.05 levy District consumers pay everywhere from grocery stores to Subway.

The purpose of said tax was to raise $3.5 million for the cleanup of the Anacostia River. The original idea is a take-off of similar measures to limit the consumption of plastic on environmental grounds. In D.C., officials claimed that up to half of the trash found in the Anacostia River, a tributary of the Potomac, was discarded plastic bags. Ideally, a plastic bag tax would encourage shoppers to literally clean up their act while raising money for other environmental efforts.

Now, a year on, data on the tax’s effects are starting to appear. District sources now openly confess the tax brought in nowhere near that $3.5 million – a little over $2 million is nearer the mark. This suggests the tax may have actually worked too well in discouraging use of plastic bags — fewer bags used, of course, means less money in the District’s coffers. The Director of the D.C. Department of the Environment, quoted in the Washington Times, corroborated that story, noting 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 taxes struggle to fulfill: both reducing consumption and raising revenue. Clearly, success on one of these fronts necessarily means failure on the other. Of course, D.C.’s bag tax wasn’t implemented specifically as a revenue raiser; tax proponents can still claim victory due to the potential positive effects the levy may have had on pollution in D.C. waters.

In doing so, they’d overlook some of the unseen costs the tax has inflicted on District residents. 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. Patrick Gleason at the Heartland Institute has also pointed out the potential harmful health effects of some types of reusable cloth bags.

Ultimately, a nickel cent on plastic bags will probably not make or break the economic fortunes of D.C. But the tax provides an interesting example of how the governments are increasingly willing to use taxes as a weapon to combat perceived social ills. From the traditional sin taxes on alcohol and tobacco, city and state governments have targeted salty snacks, candy, soda, and now plastic. Ten points to whoever can guess what product will fall under the banner of “sin” next.