Tuesday, January 13, 2009

The Case for Bloomberg's Bag Tax

Mayor Bloomberg rolled out a proposal to tax plastic bags in January, which drew a mixed bag of responses from New Yorkers, particularly in the context of city and state budget plans that seemed to offer new taxes on every conceivable item. Bloomberg's plan was two-fold: reduce the amount of plastic filling up city landfills and raise somewhere in the vicinty of $15 million for the city in the process.

From an environomental standpoint (and I mean environmental in the broadest sense), the plan is excellent--these sorts of taxes have a longstanding success rate when it comes to reducing plastic bag use (a partial list of places using this tactic can be found here). The flagship example is Ireland's 2002 tax, which reduced plastic bag use by over 90% in that nation. Even if you're not a capital "e" environmentalist, there's no denying our lived environment is improved when trees don't look like the one above (photo from Bed-Stuy). When I asked a South African friend about their plastic bag tax, his response had nothing to do with tax revenue: "we just didn't want the black plastic bag to become the national flower of South Africa."

From a tax standpoint, the plan is a more difficult sell--straight up taxes on goods are always regressive, and can disproportionately affect those businesses and consumers who are just barely breaking even. Plus, there's the issue of enforcement. Bloomberg suggests allowing stores to charge an additional penny, but this isn't much of an incentive. After all, if stores thought selling plastic bags was good for business, they probably would already sell them. A better option, enforcement-wise, would be to tax the bags at the wholesale point of purchase, when stores buy them from suppliers (plastic bag plants, I suppose). Stores could either decide to spread the added costs around in their pricing and still offer free bags, or simply make up the difference with a bag fee. Most likely, the added price of bags would discourage businesses from buying them in the first place, which would in turn keep customers from getting ahold of them and then letting them sail on the breeze into the nearest tree.

Ultimately, the pairing of the environmental concern and the tax need is a marriage of convenience. Environmentalists would like to see the tax set high enough to change consumer behavior, while from a tax standpoint such a change would eliminate the revenue stream. However, the compromise might just exist in the time delay it takes for behavior changes to take hold: if the tax is set just right (to your caculators, economists!), it could provide a short-term revenue boost when the city needs it (right now), while helping us kick the plastic bag habit and re-green our neighborhoods in the long run.

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