D.C.’s Nickel Tax on Plastic Bags
David Godow at Reason Foundation reports on D.C.’s sin tax on plastic bags. The 5 cent levy on bags was designed to raise $3.5 million to clean up the Anacostia River. However, Godow scoffs, the levy yielded much less than that mark, apparently due to the tax working too well and persuading consumers to avoid the bags and the tax:
This highlights the silliness of the dual mandate most sin tax’s experience: both reducing consumption and raising revenue. Clearly, success in one of these objectives necessarily means less success on the other. Now, 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 has had on pollution in D.C. waters.
I don’t see why this is “silly.” Obviously, the tax was going to have both the effect of raising some revenue and discouraging the use of plastic bags. That people were apparently easily nudged from their use of plastic bags suggests they were probably already poised to kick the habit. So the tax did better than expected in the externality-reducing category, and accordingly worse in the revenue-raising category. So what?
I really don’t have a problem with this kind of modest tax to try to identify and reduce externalities. I do harbor a presumption against paternalistic legislation, but, unlike some libertarians, it’s a rebuttable presumption. I suppose I feel that there is really little reason to keep on using plastic bags, but that because the practice is entrenched, it might take something like a modest tax to help break the habit. Again, I don’t prefer to use the government for this sort of thing, but then maybe I’m also a little depressed about stories like the Great Pacific Garbage Patch and how we have no ideas to fix it. If it takes a couple of nickels to help us identify one of the externalities that contributes to such problems, I will at the very least happily withhold any objections.