City of Chicago Proposes Tax on Disposable Bags

October 13, 2016

On October 11, 2016, Mayor Rahm Emanuel presented his recommended FY2017 budget to the Chicago City Council.

Included in the Mayor’s recommended budget for FY2017 is a proposal to impose a new $0.07 tax on disposable plastic and paper bags provided by merchants to customers. Stores would be responsible for collecting the tax but would then remit $0.05 per bag to the City and keep $0.02. The Mayor’s budget proposal projects that the tax will generate approximately $12.9 million in FY2017 of which the City will receive approximately $9.2 million and the merchant will retain the remainder.

The proposal is intended to limit the amount of plastic waste by encouraging consumers to bring their own bag, while also generating revenue for City operations.

Once an ordinance is introduced, the Chicago City Council will need to approve the proposed $0.07 tax in order for it to take effect. A City Council meeting to vote on the FY2017 budget proposal is set for November 1, 2016.

The City of Chicago enacted a partial plastic bag ban in 2014, which required chain and franchise stores to eliminate the use of plastic bags. However, the ordinance has resulted in unintended consequences, such as stores offering thicker plastic bags free of charge to consumers.

Similar legislation that would ban plastic bags or impose a fee on the use of plastic or paper bags have been implemented around the U.S. with mixed results.

According to news reports, San Francisco was the first major U.S. city to pass legislation banning non-reusable plastic bags in 2007. Since then, more than 200 municipalities have followed suit by imposing some form of a tax, fee or ban on plastic and/or paper bags.

More recently, the New York City Council voted to require stores charge a $0.05 fee on paper and plastic bags that was scheduled to go into effect October 1, 2016. However, the New York State Legislature intervened to override the fee and the New York City Council then voted to delay the implementation of the fee until February 2017 to find a compromise with state lawmakers.

In Texas, a number of municipalities including Austin, Dallas and Brownsville have imposed a tax or fee on the use of plastic bags. However, Dallas has since repealed the tax after it was sued because the tax violated Texas state law. More recently, the Texas Attorney General sued the City of Brownsville, which imposed a $1.00 per bag environmental fee for bags provided by merchants because under the Texas Health & Safety Code plastic checkout bags are considered to be containers or packages.

Disposable bag regulations have been contested in other parts of the country as well. California voters will be asked on the November 2016 ballot whether they support a statute that would prohibit single-use plastic bags through a referendum known as Proposition 67.

As the City of Chicago debates the adoption of this proposed $0.07 bag tax in the coming weeks the Civic Federation will continue to monitor its progress as part of the City’s FY2017 budget approval process.