Wednesday, January 27, 2010

The New Republic: Why DC's Skinny Bag Tax Works So Well

Lydia DePillis writes for TNR.

Over the weekend, The Washington Post took a look at how D.C. residents are adapting to a new five-cent tax on plastic bags that went into effect on January 1. It turns out that shoppers are now taking extreme measures to avoid paying that extra nickel—even schlepping groceries in their arms if they didn’t bring a backpack. The fee may drive people crazy, and the Journal may grumble about “bureaucracy,” but it actually seems to work: Stores report giving out half as many bags as they did before they started charging for them. And the reason seems to be rooted in how our brains operate:

"When it goes from zero to even a very small charge, it can feel very bad," said Dan Ariely, an economics professor at Duke University. "It creates a very small financial burden but a very big emotional reaction."

This reminds me of a Tom Friedman column from back in the summer, when the Waxman-Markey bill was dragging its way across the finish line in the House. Friedman hated the "Rube Goldberg" contraption that survived after umpteen amendments and concessions, but said legislators should pass it anyway. "If the U.S. government puts a price on carbon," he reasoned, "even a weak one, it will usher in a new mindset among consumers, investors, farmers, innovators and entrepreneurs that in time will make a big difference—much like the first warnings that cigarettes could cause cancer. The morning after that warning no one ever looked at smoking the same again."

The reaction to the bag tax here in D.C. suggests Friedman might be onto something. You don't even need a large price signal to have an effect—indeed, getting too ambitious too early could engender a revolt. Last fall, for instance, Seattle voters rejected a 20-cent bag tax. If proponents had only aimed lower, like D.C. did, the measure might have passed, and they would have then gotten some impressive reductions in bag use. Instead, they got nothing—which is what we can expect if a climate bill fails to pass this year, as well.

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