The Economic Impact of Washington D.C. Bag Fee

May 25, 2011 at 7:04 pm Leave a comment

The economic impact of the bag fee in Washington D.C.  is disputed.  A study by The Beacon Hill Institute at Suffolk University estimated, using an economic model, that if all other factors remain constant, the bag fee will eliminate 101 jobs in the area and a loss of $602,000 of investment, mostly in the retail industry. These losses will also reduce sales tax revenue and offset the revenue gained from the fee, which will ,over time, decrease.  The study reasons that the negative economic impacts will occur due to consumers shopping outside of Washington D.C. and by reallocating some income to the fee which they would have spent on other items.[1]
Proponents of the fee argue that empirical data shows that the model’s predictions are false. In a survey of business owners in Washington D.C. only 12% reported a negative impact on their business while, 78% reported a beneficial or neutral impact.[2] In addition the model is built on a standard model of sales tax increase, which does not accurately reflect the nature of the bag fee.  The bag fee is avoidable, unlike a tax[3], so consumers have a third option.  Instead of spending income on the fee or shopping elsewhere, as the model argues, consumers can also make a one-time purchase of a reusable bag and incur no further extra cost. In addition the model fails to take into account the economic benefits to business, including the reduced cost of buying and storing bags, and the value of the environmental benefits.[4]  This would indicate that the model overestimated the net negative impact of the fee and a net positive impact cannot be ruled out.

[1] The Beacon Hill Institute at Suffolk University. The Impact of Bill 18-150 on the Economy of Washington, D.C.. : The Beacon Hill Institute at Suffolk University, 2011. http://www.atr.org/files/files/DCBagTaxStudy.pdf., pg. 4
[2]ontgomery County, Maryland . “Leggett Proposes Five-cent Charge on Paper, Plastic Carryout Bags Provided by Retailers to Encourage Use of Reusable Carryout Bags, Enhance the Environment; Funds Dedicated to Water Quality Protection.” http://www.montgomerycountymd.gov/apps/News/press/PR_details.asp?PrID=7374.
[3]Kizler, Josh. “Update: The efficacy of Washington, D.C.’s bag fee.” Plastic Bag Laws. Accessed May 12, 2011. http://plasticbaglaws.org/update-the-efficacy-of-washington-d-c-’s-bag-fee/#_edn11.
[4]Brown, Josh. “Bag surcharge a detriment to D.C., study says.” Washington Times, February 10, 2011.

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