D.C. Bag Tax & Externalities

 

D.C.’s tax on plastic bags may be small but it’s effect is surely mighty. The tax is a mere nickel however, it seems to be having an influence buyer shopping patterns which may also be indirectly affecting the environment for the batter. This 5 cent tax has buyers skipping out on the plastic bag option and has customers opting to bring in their own reusable bag and even carrying groceries by hand. The article “Why D.C.’s Skimpy Bag Tax Works So Well” stated that many stores in D.C. have reported a significant decrease in the demand for plastic bags with stores giving out only half the amount of bags as before. Although, D.C.’s adoption of the bag tax has been ultimately successful, other cities have had trouble implementing the tax in their city. The bag tax has been linked to decreased use of plastic bags and ultimately less plastic bags will end up in the landfill. This leads to a reduction in the negative externality on the environment with decreased pollution and an increase in the use of renewable resources.

 

If we were to approach this issue in a manner that is more suitable to be implemented in our government, the Pigouvian tax is the best solution. This is the ideal solution because it does not limit anything. Those who do not mind paying for the tax should be allowed to use plastic bags, while those who prefer a greener solution should be compensated for helping the environment. The revenue created by the tax benefits those who make a difference by using a greener solution and this creates an incentive for for more environmentally friendly bags– which in return helps the environment and ultimately us.

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