A Bag Tax

by Elaine Schwartz    •    Jan 27, 2010    •    TIME TO READ: 1 minute

Washington, D.C. got a bag tax on January 1. Now, any store that sells food (even a book store that sells mints) has to charge its customers $.05 for every bag they use (not just for the food but everything!).

The results…
1. One Safeway reported using 6,000 fewer bags during the past week.
2. Because Victoria’s Secret sells edible body icing, it falls within the jurisdiction of the act (not just for the icing but for all purchases).
3. Countless people report dropping parts of lunches as they juggle sandwiches, Sushi, water bottles, fruit, fries.
4. Someone carrying a container of milk and a can of Spam had an onlooker wonder, “What is he going to do with SPAM?” Will Spam purchases decline?
5. One woman, pushing a cart of 19 items in her shopping cart as she walked to her car said, “Now it looks like I’m stealing them.”
6. When it is raining, more people want bags.
7. What about bag related jobs? How will the tax impact unemployment?
Behavioral economist Dan Ariely, predicted the outrage over the tax would last because people are reminded at the register every time they make a purchase. “It creates a very small financial burden but a very big emotional reaction.”

Why?
Comments?

The bag tax is about a lot more than bags. Tomorrow, lessons that proponents of cap and trade and health insurance can learn from the bag tax.

The Economic Life:
Taxes affect supply and demand curves. When they increase a firm’s costs, the supply curve shifts leftward. Similarly, when the demand side is directly hit, the demand curve shifts leftward. Either way, taxes make price increase and quantity decrease.

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