Another Taxing Opportunity: Plastic Bags in PA | AccountingWEB

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. 

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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.
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