Bag Fee vs. Tax: More industry rhetoric

Cross-posted on Ban the Bag!

The most common refrain from industry’s echo chamber on a proposed bag fee is: ”it’s a tax,” and taxes, as we all know, is politically a very bad word. Even among fellow advocates, it seems like I am constantly correcting people when they refer to “Washington, DC’s bag tax.” It’s a fee, and I’m not just being a hard-ass worried about appearances when I correct people. They really are two different things.

The five cents charged for single-use plastic and paper bags in DC is a fee because the purpose of the charge isn’t to raise revenue–it’s to encourage people to use reusable bags, and reduce the number of bags entering the waste/recycling/litter stream. Also, the proceeds are tied directly to the consequences of using that bag: litter prevention and river restoration.

As described by the Tax Foundation, and written by now US Supreme Court Justice Stephen Breyer in 1992, there are three tests to define a charge as a tax:

    – who imposes the assessment
    – who pays the assessment
    – what the revenue is spent on

If the answer to each is broad (a legislative body vs. a regulatory body; the general public vs. specific users; and general revenue vs. specific fund), then it qualifies as a tax. DC’s bag fee only meets the first point. This distinction was clarified by the Virginia Supreme Court in 2008:

“When the primary purpose of an enactment is to raise revenue, the enactment will be considered a tax, regardless of the name attached to the act….”

As the Tax Foundation continues on its blog:

“The converse of that is that when the primary purpose of an enactment is to offset the cost of providing a service, it is a fee.”

Another way to look at the bag fee is as a user fee. Unlike a tax, you don’t have to pay it. People who choose single-use bags can pay for the privilege. Shoppers who decline to use a bag, or bring their own, don’t pay it. Now, to complicate matters, Montgomery County, Maryland, does officially call their five-cent bag charge an excise tax, because it is applied to a specific good. They used this definition because of an unusual authority the county has to enact excise taxes without permission from the state’s General Assembly. (Prince George’s County does not have this authority, so they have to request permission just to consider a bag ordinance! However, Montgomery County still expects the revenues to diminish over time, and the proceeds are targeted to stormwater improvements and litter abatement. It still only meets the first of the three criteria for being a tax, as in DC.

So when confronted by industry shills that automatically bleats, “It’s a tax!” your simplest reply is: “No, the intent is not to raise revenue, and you don’t have to pay it if you don’t use the bag,” and if they press you, get a little nastier and say, “What’s at issue here is that it’s terrible that we have to impose a fee at all, shouldn’t YOU (industry) be paying to cleanup the mess your product creates in the environment? What we need is a tax on YOU, to shift the burden of cleanup from the taxpayer to the polluting industry that creates the mess in the first place.”

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