LEARNING TO LOVE SIN TAXES…. A year ago, the city of Washington, DC imposed a 5 cent fee on disposable plastic and paper bags. The idea was to discourage litter and give people an incentive to switch to reusable bags. To be honest, I found myself ridiculously irritated at the law when it went into effect. Perhaps it was one of those deep-seated psychological reactions that behavioral economists talk about – in particular, something called the ”endowment effect” or ‘’divestiture aversion’’ wherein we put irrationally high value on property or a privilege we already have.
In any event, by now I’m used to fee. In fact, I actually don’t mind forking over an extra nickel for the convenience of having a bag in which to carry my burrito back to the office, because I know it’s for good cause, and that if I really want to avoid the charge, I can bring my own bag.
The bag fee is, of course, a version of a “sin tax.” And in the wake of Barack Obama’s call last night for overhauling the tax code and reducing the deficit, I thought it worth passing along news of how well this particular one has apparently worked.
“City officials have estimated that there was an astounding decrease of some 80 percent in bag use,” notes the Washington Post today, “from about 270 million a year before the fee was imposed to around 55 million bags in 2010.”
The fee didn’t bring in quite as much revenue as anticipated — $2 million rather than $3.5 million — but that of course is the flip side of its astonishing success at changing behavior.
A national debate about tax reform is about to kick into high gear, and as it does I hope the advantages of various kinds of sin taxes are at the center of that debate. It makes enormous sense to increase taxes on things that do us and society harm — from soda and cigarettes to petroleum and financial transactions. Doing so will increase desperately needed revenue while decreasing dangerous behaviors. And while we won’t like such taxes at first — indeed, we may hate them — we’ll eventually get used to them, and maybe even feel virtuous for having imposed them on ourselves.