The District’s 5-cent fee on paper and plastic bags is hurting the economy, a recent study alleges, by eliminating jobs.
The Beacon Hill Institute at Suffolk University – a learning and research center in Boston that analyzes public economic issues – claims the tax will not earn as much money as the District planned, and has negative effects on retail sales. The study also said the tax will cost D.C. 101 jobs.
Commissioned by Americans for Tax Reform, a Washington-based nonprofit group that is against all tax increases, the study found the amount of funding from the bag fee won’t be as high as the city expected.
The District’s static revenue estimate from the bag fee is $3.1 million in 2011, but the tax will only raise $2.17 million this year, according to Paul Bachman, BHI’s director of research.
The 2-year-old tax adds a $.05 fee on paper and plastic bags at D.C. stores when customers purchase food or alcohol in D.C.
The law also aims to reduce the use of plastic bags for the benefit of the environment. Four cents of the tax go toward the Protect the Anacostia River Cleanup Fund, and retailers keep the remaining penny.
BHI used a computerized method of accounting to determine the employment rate in 2011 both with and without the bag fee as a variable and compared their findings with economic data for D.C., Bachman said.
The study notes that lower-income residents will be most affected by the bag fee, and that, “All other things being equal, the bag tax will reduce the level of retail sales” within D.C.’s economy.
Councilmember Tommy Wells’ chief of staff, Charles Allen, said Wells, who sponsored the bill enacting the tax, believes the study is false. Allen said the study “is just not true” in a phone interview.
Allen said what BHI did “is not a real report of what is happening.”
The chief of staff charged that Suffolk University drafted their desired results before the study began.
“What they’re projecting hasn’t happened in D.C., so it is hard to take them seriously,” Allen said.
He added since the study was put forth by an anti-tax group, the study is fulfilling specific objectives.
Bachman countered that no one can know what the end of 2011 will bring, but his group is confident in its initial predictions.
Allen said a total of $2.1 million was earned in 2010 from the bag fee to help the Anacostia River, a figure calculated by the city’s Chief Financial Officer Natwar M. Gandhi.
