Chicago Bag Tax Is About Green, But Which Kind?

Mayor says bag tax is about the environment, but critics say it's about cash

The 7-cent a bag tax that Chicago aldermen approved Wednesday as part of a new city budget has its roots in Ireland, where lawmakers in 2002 imposed a levy on environmentally unfriendly plastic bags that dramatically reduced their use and curbed litter.

But the plan pushed by Mayor Rahm Emanuel appears a breed apart from the Irish model, or for that matter an array of municipal copycat bag taxes that have swept the U.S. in recent years. Critics contend it is designed more to fill a budget hole than unburden landfills of material that won’t easily decompose. 

The evidence for that argument is multi-faceted. The Chicago tax, which will apply to paper as well as plastic, is far lower than the 30-cent a bag charge that successfully curbed behavior in Ireland, raising questions about whether shoppers at grocery and retail outlets will view it more as an annoying trifle than a penalty to actively avoid. 

Mayor Rahm Emanuel
Chicago Mayor Rahm Emanuel | Ashlee Rezin,  for the Sun-Times

What’s more, the proceeds from the Irish tax as well as some of those imposed in U.S. cities are channeled into special funds that underwrite environmental programs. Not so in Chicago, where most of the $12.9 million expected to be raised next year will go straight into the city’s precariously balanced main checking account.

“It is not about the environment,” said Kim Wasserman, executive director of the Little Village Environmental Justice Organization, a neighborhood nonprofit.

Wasserman argued that if the city was serious about reducing bag pollution it would put its efforts into consumer outreach and education rather than impose a new tax.

The bag tax fits neatly into a growing category of levies imposed with the stated goal of modifying and curbing undesirable behaviors.

Just last week, the Cook County Board passed by the narrowest of margins a penny-an-ounce tax on sweetened drinks, an idea long pushed by former New York Mayor Michael Bloomberg who sees excessive soda drinking as a public health concern.

The county beverage tax is expected to raise about $221 million in its first year of full implementation and, like the city’s bag tax, the proceeds will go into the county’s strapped general fund.

>> Read this story at the Daily Herald

Both Emanuel and his mayoral predecessor, Richard M. Daley, went all in on installing red light and speed camera devices across the city in what they said were drives to improve public safety.

The actual safety benefits from the devices have been the subject of intense public debate. But what is clear is that the cameras have netted hundreds of millions of dollars in traffic fine revenue.

As for the bag tax, the city maintains that its inspiration is green at heart.

“Ultimately, the goal of the (bag) tax is to change behavior and change how people utilize disposable bags,” said Molly Poppe, Office of Budget and Management spokeswoman.

Yet, as part of a compromise with retailers, Chicago is undoing a ban on thin plastic bags that was implemented just 16 months ago. Retailers were urged to replace the single-use totes with either paper bags or thicker plastic bags designed to carry at least 22 pounds of goods and durable enough for 125 reuses. 

Retailers argued that the new rules added to their operating costs while doing little to prod consumers into taking fewer bags. For its part, the city now has declared the ban on thin bags a failure.

“The problem, or complicating factor, is that the City of Chicago sees this as an opportunity to create revenue to support services," said Jordan Parker, founder of Bring Your Own Bag Chicago, a grassroots environmental group that pushed for the bag ban and and also supports the tax.

Usually retailers are opposed to one-off taxes on goods such as bags. But Emanuel’s new tax is structured so that the city will keep 5-cents for each bag dispensed while store owners will get the other 2 cents. Officials expect that retailers overall take from the bag tax will amount to $3.7 million next year.

“We wouldn’t generally be for fees; we generally aren’t for taxes,” said Tanya Triche, vice president and general counsel for the Illinois Retail Merchants Association. "But this is a fix to an ordinance that has cost retailers a lot of money, and eventually consumers (as well) because we pass those costs along.”

Four years ago, the American Progressive Bag Alliance, a lobbying group representing the plastic bag industry, won General Assembly approval of a bill to block local governments from implementing bag bans or the imposition of any taxes and fees on bags. Then Gov. Pat Quinn vetoed the legislation, responding to concerns aired by environmentalists as well as a 13-year-old girl who spearheaded a campaign against the bill with the slogan, “Don’t Let Big Plastic Bully Me.”

Environmentalists argue that a large number of plastic bags end up in landfills, where they take hundreds of years to break down. Many bags also find their way into waterways and put marine life at risk. But the plastic bag industry points out that bags make up a tiny percentage of the waste stream and shoppers can recycle them at some grocery and retail stores.

Critics of so-called excise taxes, the technical name for levies on specific goods, consider them regressive because they tend to impact low-income earners the hardest. The new Chicago tax does carve out an exemption for shoppers who rely on government aid to buy groceries, but those of modest means who don’t qualify for food stamps will still be required to pay for bags if they don’t bring their own.

Meg Wiehe, state tax policy director at the Institute on Taxation and Economic Policy, a research group based in Washington, D.C., said one-off taxes on goods exacerbate income inequality. The tax code can’t correct the problem, she said, but it shouldn’t make the problem worse.

What's more, if the tax works as intended, revenue is designed to fall as less people engage in the “bad behavior,” Wiehe said, stressing that filling budget holes with excise taxes is poor public policy.   

First Ward Ald. Proco Joe Moreno, who has been critical of the bag tax, doubted whether a 7-cent charge was high enough to induce shoppers to avoid paying it by bringing their own bags.

“This is not the best policy,” said Moreno, who supported the soon to be invalidated ban on thin plastic bags. “We are taking a baby step and we don’t need to. We can take an adult step.”

Moreno said he tried pushing Emanuel to ban all plastic bags while imposing a 10 to 15 cent tax on paper bags. The idea got little traction.

Tatiana Homonoff, an assistant professor of economics and public policy at New York University who has studied bag taxes, said small levies may change the behavior of some shoppers but by no means all. That said, Homonoff argued that having a sweeping effect is probably not the goal of a bag tax.

Policymakers, she said, are providing an incentive for those who just need a nudge to switch to reusable bags. And her research shows that a charge of just a few cents could achieve that limited goal.

Others, however, will carry-on undeterred.