Tiny Taxes…Big Results
Journalists discussing the D.C. bag tax think they are on to something.
1.The small tax has a better chance of being passed. Seattle refused to accept a $.20 bag tax. D.C. said $.05 was okay.
2. Because of the tax, people perceive bags entirely differently. Bag use has plummeted. Because of the $.05? Probably not.
3. The lesson? For cap and trade and for high priced health insurance? Very small taxes can lead to big results.
The Economic Life:
Incentives shape behavior. All taxes, big and small, create incentives that make each of us choose to behave a certain way. Sometimes, legislators have been surprised by the incentives they created.