Tuesday, October 05, 2010

DC Bag Tax Falls Short On Revenues; Proponents Remain Optimistic

Washington DC had enacted a tax on plastic bags with the intent of curbing their use.

The tax has worked but the anticipated revenues never materialized.
Since January, District residents have been charged 5 cents for each disposable bag they pick up at the grocery store or local market. Four cents of the tax goes to the city, while the retailer is allowed to keep the rest to cover costs.

The latest data from the D.C. Office of Tax and Revenue reveals the city collected just over $1.3 million in revenue from the tax through September. A number that falls far short of the official $3.6 million estimate, made by the District's chief financial officer in 2009.

That's because the number of bags being used by consumers has fallen off the chart.

The use of bags by shoppers at grocery stores is down by 50%, according to an informal survey conducted by the office of Councilman Tommy Wells. He was one of the original bill's sponsors, and the driving force behind the tax. Some big name grocers like Giant, Safeway and Harris Teeter have reported that bag use by their customers has fallen by 60%.
Reducing pollution is a worthy goal. The problem is that the revenues were allocated toward clean-up efforts along the Anacostia River. If the District allocated $3 million for cleanup, but took in less than half that amount, the program wouldn't be able to do its job. While some cleanup is better than none, allocating tax revenues from taxes that are designed to eliminate certain behaviors are more likely result in shortfalls. It also means that revenues will need to come from elsewhere to fully fund the cleanup activities, raising taxes and fees elsewhere to cover the differences.

No comments: