Wednesday, December 29, 2004

Taxing bags, and bags for a fee 

John Palmer wonders whether a 17 cent tax on plastic grocery bags in San Francisco is efficient.

I'm all in favour of considering user fees when an activity imposes negative externalities, but this seems extreme. First, I'm not sure how big the externalities from grocery bags are -- where I live, most people recycle the plastic grocery bags, and it is difficult to think of re-cycled bags as meriting a user fee.

Second, I suspect the price elasticity of demand for plastic garbage bags is so high that a 17-cent charge is much higher than the efficient charge. My ad hoc observations from stores that charge only two cents per bag is that LOTS of people bring their own bags when they go shopping.

We have a per bag fee for putting out garbage in St. Cloud; a green, labeled Hefty costs $2 each. This has encouraged a great deal of recycling, and more than a little searching by some for dumpsters at apartment buildings and businesses. A couple of grocery stores which have you bag your own groceries sell tote boxes; these are not very popular items as best I can tell.

The other thing I notice is that most people here do not choose plastic. Paper bags dominate when choices are offered. The bags are used by people to sort recycling ... and as bags for garbage to put in the green $2 trash sacks. I suspect that where the option is offered, paper will dominate plastic in SF too; the elasticity is probably quite high.