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No paper, no plastic. The tax that works too well

By Charles Riley, staff reporter


NEW YORK (CNNMoney.com) -- The tax on single-use disposable bags in Washington D.C. is proving to be very effective -- maybe too effective. The tax is bringing in far less revenue than expected.

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%.

Less revenue, more benefit?

Despite not generating a lot of revenue, the bag gap is being cheered by proponents of the legislation. Why? Because funds generated by the tax are allocated toward clean-up efforts along the Anacostia River -- a polluted urban waterway choked with discarded plastic bags. Fewer bags in general circulation, means fewer bags landing in the river.

According to Brent Bolin, the director of advocacy at the Anacostia Watershed Society, the number of plastic bags found during his group's river clean-up efforts has dropped significantly since the tax was instituted.

"We are definitely going in the right direction," Bolin said. "But we've got a long way to go. This is D.C.'s forgotten river -- it's the river on the poor side of town, and it's received a lot of abuse over the centuries."

The results of the annual Alice Ferguson Foundation cleanup tell the same story. In 2010, the group reported a 50% decrease in the number of plastic bags found during its annual watershed cleanup.

As more and more municipalities consider a tax on bags, there might be lessons to be learned from D.C.'s experiment.

"Any jurisdiction proposing a tax of more than a nickel is not interested in revenue," said Bill Ahern of the Tax Foundation, a Washington-based tax-policy group that favors lower taxes.

The trade-off between revenue and the environment seems to be driving decision making at the local level. Some municipalities -- like Telluride, Colorado -- are looking to follow in the footsteps of San Francisco. The city instituted an outright ban on plastic bags at grocery stores 3 years ago, in the interest of helping the environment.

The recession looms

But a tax or prohibition on bags is not necessarily coming soon to your neck of the woods. In September, the California state legislature failed to pass a bill that would have banned plastic bags statewide. Voters in Seattle rejected a measure last year that would have resulted in a 20 cent tax on disposable shopping bags.

One reason that taxes and bans are not spreading like wildfire is that jobs are at stake, according to Keith Christman, the managing director for plastics markets at the American Chemistry Council.

"With the economy we have today, putting people out of work due to bans and taxes [on bags] is not the best approach," Christman said, before adding that many jurisdictions already have programs in place for recycling plastic bags. To top of page

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