A Government Charge of Five Cents per Plastic Bag: Tax or Fee?

December 3, 2008

Toronto has enacted a citywide charge of 5 cents per plastic bag, calling it a fee, as reported in The Star. (hat tip: Jacob McCay)

A similar measure failed in New York City because it was deemed a tax, which the city’s administration cannot enact without legislative approval. Here’s how Tax Foundation economist Josh Barro described New York Mayor Bloomberg’s proposal in a recent analysis:

A new five-cent-per-bag “fee” on disposable plastic shopping bags (expected to raise $16 million in FY’10). The Bloomberg administration maintains this proposal isn’t a tax, despite the fact that the proceeds do not defray costs for the government to provide a specific service but rather provide general revenue. Most authorities would call it a tax, and the distinction matters, because the city council can approve a new fee, whereas a tax would require assent from the state legislature. Other cities that have considered such proposals (including Seattle) have properly labeled them as taxes.

The Star article doesn’t explain where the revenue goes, but if it goes into general revenue, it’s properly called a tax, not a fee.

Plastic bags aren’t the only things that are being taxed with “fees.” 911 calls in California, courts in Florida, lottery tickets in North Carolina, strip bars in Texas, driving on a bridge in Louisiana, etc.

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