Another Taxing Opportunity: Plastic Bags in PA

By Teresa Ambord
There's nothing new about governments trying to use tax as behavior modification. They've been doing it forever, with home mortgage deductions, adoption credits, energy improvement credits, fuel-efficient vehicle credits, etc. Sometimes government encourages marriage with tax benefits and sometimes it punishes marriage. Now the behavior being targeted in some states and areas of the country is the choice at the grocery store of "paper or plastic." If one Pennsylvania senator has his way, consumers who choose plastic in his state will pay a tax to do so. 
SB 1080: Plastic Bag Tax
SB 1080 was introduced by Senator Daylin Leach (D-PA) in early August. The point, in Leach's words, is to have a bill "that would encourage consumers to shift away from using inefficient plastic shopping bags by imposing a two-cent fee for each bag provided by a retail establishment." 
To support his thinking, he explained it this way. Americans as a whole use 102.1 billion plastic bags per year. According to the Clean Air Council, less than 1 percent of the bags are recycled (although this doesn't account for those of us who routinely reuse bags as small wastebasket liners and poop-scoopers when walking our dogs). 
Leach says the average American family uses about fifteen bags in a trip to the grocery store. Under the two-cents-a-bag bill, this works out to thirty cents per trip, and that's not going to bust anyone's budget, he said. But . . . isn't the purpose of the tax to get people to stop using plastic – not to preserve budgets? 
Where will the collected tax go?
One cent per bag will go to the retailers "to improve their internal recycling practices." The other penny will go to Pennsylvania for the state's recycling fund. The uses for the funds sound like worthy causes, although if the senator's plan succeeds and behavior is changed, the recycling programs will get diminished funds over time. So let's hope lawmakers aren't counting on this money as part of their revenue budgets, as they tend to do.
Also, little has been said about the added paperwork burden. Businesses will have to account to the government for the bags used, calculate and pay the tax, and pay it along with some kind of report to be filled out. They'll also have to show some accountability for how the recycling funds are being employed. And of course, the Pennsylvania government will have to add people and systems to enforce the tax, collect the revenue, and penalize those who fail to comply. 
What's the history on this type of bill? 
This will be the first statewide bill of its kind, if it passes. Eight other states – Hawaii, Louisiana, Maine, New Jersey, New York, Rhode Island, Vermont, and Washington – are also considering trying to pass such a bill. Florida and Maryland have already tried and failed to pass similar taxes.
Mayor Bloomberg in New York City tried to pass a ten-cents-a-bag tax, but he also failed. Seattle tried twenty cents, but when it learned the public was poised to vote no, it changed the tax to five cents and passed it. That was a sign the public was willing to change behavior . . . up to a point. 
Washington, DC, does have a five-cents-a-bag tax on plastic at grocery stores, drugs stores, and retail food establishments. 

AccountingWEB Reader Insight Survey

Once a year, we ask our readers to take a few minutes of their time and complete our reader survey. 
Our goal is simple. We want to learn more about you so we can better meet your needs. 
As a thank-you for taking the survey, we're offering a free download of the AICPA's whitepaper Accounting Services: Harness the Power of the Cloud. Inside, you'll gain the latest insights into how technology is changing the accounting profession. 
Has the DC plan worked? 
It depends on what the true goal was. If the goal was to change behavior, it has indeed been successful. In the first month, January 2010, the average bag use in DC of 22.5 million dropped to only 3 million – close to an 88 percent decrease. 
The DC bag tax revenue goes into the Anacostia River Cleanup Fund, and it was hoped the fund would grow by $10 million in the first four years. But, if behavior does change – and it has – the revenue diminishes. 
The significant drop in bag use in the first month found DC falling 30 percent below its targeted revenue, and from there it continued to fall. According to Forbes magazine, the DC Office of Chief Financial Officer reported the bag tax raised $1.5 million in the nine months of fiscal year (FY) 2010, $1.8 million in FY 2011, and $975,000 in the first five months of FY 2012. Those numbers are well below expectations.
Again, if behavior modification was the true goal, DC has succeeded. With Pennsylvania's plan, if it passes, only time will tell how successful it will be. Because to increase chances of the bill's passage, Senator Leach had to keep the tax low enough to not bust anyone's budget. But if it's low enough to not bust anyone's budget, is it high enough to cause consumers to change their behavior?
Let's hope if it passes, it's not just another taxing opportunity and an added paperwork burden.

You may like these other stories...

Savvy tax planning is about more than knowing what to write off. Just as essential is knowing when to take deductions. Choosing to stuff deductions into one tax year as opposed to another bears directly on how much winds up...
Tesco says it overstated profit forecastStanley Reed of the New York Times reported that Tesco, the large British grocery retailer, disclosed on Monday that it had overstated its expected half-year profit by about $400...
The IRS has announced the special per diem rates for 2014-15 that taxpayers can use for substantiating the amount of ordinary and necessary business expenses incurred while traveling away from home. The new per diem rates...

Already a member? log in here.

Upcoming CPE Webinars

Sep 30
This webcast will include discussions of important issues in SSARS No. 19 and the current status of proposed changes by the Accounting and Review Services Committee in these statements.
Oct 21
Kristen Rampe will share how to speak and write more effectively by understanding your own and your audience's communication style.
Oct 23
Amber Setter will show the value of leadership assessments as tools for individual and organizational leadership development initiatives.
Oct 30
Many Excel users have a love-hate relationship with workbook links. For the uninitiated, workbook links allow you to connect one Microsoft Excel spreadsheet to other spreadsheets, Word documents, databases, and even web pages.