Seattle's Peculiar Tax on Bags


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Seattle's City Council approved a 20 cent disposable bag tax last week for grocery, drug and convenience stores across the city, scheduled to go into effect on January 1. Seattle residents use about 360 million paper and plastic bags per year, a number city officials hope to cut in half.

There are persuasive arguments on both sides as to whether this is a good idea. While a tax on disposable bags is inherently regressive, essentially an additional sales tax, many stores do offer cloth bags as alternatives to disposable ones or allow customers to bring their own. The city plans to provide all residents with a few reusable cloth bags for free. Another argument against the tax is it will require the purchase of disposable bags by many families who formerly acquired them for free to use as trash can liners, to transport food, and to pick up pet waste. This could diminish the positive environmental impact of the tax.

Supporters of the disposable bag tax say the tax provides a strong incentive for recycling which doesn't exist when bags are free. For example, Los Angeles estimates that its residents use nearly 2 billion plastic bags per year and only about 5% are recycled. There is solid evidence that disposable bag taxes have a strong effect on consumer behavior. Ireland implemented a plastic bag tax in 2002 and plastic bag consumption subsequently fell more than 90%.

Department stores are strangely exempt from the bag tax, even though they contribute nearly a quarter of disposable bag usage in Seattle. As Holly Chisa of the Northwest Grocery Association told the Seattle Post-Intellegencer, "If you're going to try to change behavior, everyone should be involved." Equally strange is where the proceeds of the tax are slated to go. Seattle allows large stores to keep 5 cents per bag for administrative purposes while the other 15 cents will go to the city to finance utility rate reductions and to purchase reusable bags. But businesses that gross less than $1 million get to keep the entire bag tax they collect. This amounts to a large unjustified subsidy for small businesses.

Whether Seattle's January 2009 bag tax is likely to be "successful" or not is certainly debatable, but there are several pressing issues that should be resolved to improve the likelihood of success. The tax should not be used to provide a small business subsidy and large retailers should not be exempt from the tax. The city should also consider reducing the regressivity of the bag tax by creating a positive incentive, such as mandating a rebate for not using disposable bags rather than a fee per bag. While this might not be quite as successful at reducing disposable bag usage, it would eliminate the potential burden on low-income families.

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