Monday, February 8, 2010

D.C. Bag Fees Do Indeed Hurt Merchants

One D.C. council member is amazed at the notion that the 5-cent fee for plastic bags may be hurting retailers (Washington Post):
Council member Tommy Wells (D-Ward 6), the sponsor of the bill, said the regulations are closely aligned with the legislation the council passed in June.
However, Wells is concerned about a provision in the bill calling for a study on whether the city should make a hardship exemption for "certain types of retail establishments." Wells said he's baffled by the provision because the tax doesn't cost the businesses any money.
"I have not heard it being a hardship on retail establishments," he said. "There has been some customer concerns, but it seems since the fee is charged to the customer and not the business, that really doesn't make any sense," Wells said.
Let's be clear: Anything that makes it more inconvenient or expensive for your customers to shop at your store hurts your business.

To start with a more abstract example, imagine that a city institutes a "Safeway tax," so that all Safeway customers have to pay a 50-cent fee that they don't have to pay elsewhere. Or imagine that Safeway's parking lots must by law be located several blocks away from the stores. In both cases, the store's customers are the ones paying the price (in money in the former case and in inconvenience in the latter), but arguing that these proposals wouldn't hurt Safeway is asinine.

The D.C. bag tax functions the same way: it forces customers to either pay a fine or suffer a major inconvenience. Either way, it makes grocery shopping in the District less pleasant.

The magic of capitalism is the ability to find substitutes when the price of one good rises relative to others. Many customers will instead do their grocery shopping in Maryland or Virginia. Additionally, many people will now find grocery shopping more of a chore and will instead eat out more.

To combat some of these effects, some D.C. stores are now giving away reusable bags. Of course, this is an additional expense that they did not face previously.

By the way, I've written previously on this topic here.