In this second part of the halftime report for Tax Foundation Forum: Making Sense of Profit Shifting, we discuss the key takeaways from the first half of our series on profit shifting (read part I here). In this post, we...
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- D.C. Charge on Plastic Bags is a Tax, Not a Fee
D.C. Charge on Plastic Bags is a Tax, Not a Fee
The D.C. city government has launched a campaign to make people aware of the new tax on plastic bags going into effect on January 1, 2010:
Beginning January 1, 2010, District businesses that sell food or alcohol must charge you 5 cents for each disposable paper or plastic carryout bag.
The business keeps 1 cent, or 2 cents if it offers a rebate when you bring your own bag. And the remaining 3 or 4 cents go to the new Anacostia River Protection Fund. DDOE will administer this fund. We will use it to provide reusable bags, educate the public about litter, and clean up the river.
The District has also partnered with CVS/pharmacy to produce and hand out 112,000 reusable bags.
Putting to one side the question of whether a tax on some plastic bags to fund trash cleanup for one area is wise public policy, the new charge is properly called a selective excise tax. The bill may call the charge a fee, but it's a tax. If it were up to legislatures, few things would be called "taxes," and loose definitions help deprive taxpayer protection provisions of any meaning.
A fee funds services directed at those who pay it, or pays for regulating their conduct. Taxes produce surplus revenue for general government programs. Since the latter is what is happening here (most of the trash in the Anacostia is not plastic bags, and plastic bags pollute other things), it is a tax.
Because American antipathy to taxes is so deeply rooted in our nation's history, lawmakers often seek to raise revenue in ways to avoid the "tax hiker" label even if it requires calling an obvious tax a "fee." That's what's happening here. These shell games undermine transparency by making it harder for citizens to understand the cost of government.
Check out our brief in Weisblat v. City of San Diego for a discussion of the law on tax/fee distinctions.
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