New D.C. Bag Charge is a Tax, Not a Fee

July 8, 2009

From the Examiner:

D.C. Mayor Adrian M. Fenty has signed a bill that tacks on a 5-cent fee for each disposable bag leaving grocery, drug, convenience and liquor stores.

The new fee goes into effect Jan. 1.

Most of the money raised by bag fees will go toward cleaning the Anacostia River, which is polluted by 20,000 tons of trash each year. The fee is initially expected to raise about $3.5 million annually for the cleanup, with the amount shrinking as more residents use their own bags. Some money will also go toward education and providing residents with reusable bags.

The legislation also requires that the bags that are sold be recyclable and carry a message encouraging recycling.

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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