Ax the Package Tax

Sometimes, bad ideas get dressed up in such attractive packages that legislatures make them law. A good example that hopefully won't come to Michigan is the idea of advance disposal fees, or ADFs for short.

Advance disposal fees are essentially taxes imposed on containers at either the distributor or retail level. Most proposals call for flat-rate fees for all packages, though some states are contemplating a range of fees depending upon the "environmental" qualities of different packages or the rate at which particular packages have historically been recycled. Advocates claim that ADFs will reduce litter, save resources, reduce the need for landfills, and strengthen recycling programs.

Consider the potential annual impact on a household of four which spends $100 per week at the grocery store. That represents a purchase of about 50 different items, some of which have multiple packages (for example, a 6-pack of soda). It's safe to assume, then, that a $100 purchase will actually include 75 individual packages. With an ADF of $0.10 per package (a fee envisioned in a plan being pushed by the State of North Carolina), the consumer would pay a weekly premium of $7.50 or $390 annually-equivalent to a 7.5 percent sales tax on grocery items!

One state-Florida-has already imposed ADFs on containers with recycling rates lower than 50 percent. The fee was set initially at $0.01 per container and is scheduled to double to $0.02 in January 1995. Floridians will pay about $25 million in ADFs this year. At least eight other states are considering ADF proposals in their legislatures.

Imposition of an ADF program in Michigan would go much further than the state's current bottle deposit law. Not all proposals in other states offer refunds of the fees if containers are returned, and unless ADFs are applied in a traditional deposit/refund system, they provide almost no incentive for litter reduction. Beyond that, the concept itself suffers from inherent problems that legislators ought to consider seriously.

ADFs would likely produce only modest increases in recycling, because many packaging containers are already among the most highly recycled items in the waste stream. All packaging makes up only about 30 percent of the waste stream and another 30 percent of that is currently recycled-a small enough proportion to suggest that additional recycling of package materials would have only minor impact on overall recycling rates or on waste diversion.

Actually, because some packaging is recyclable only at high cost (or not at all), ADFs may result in shifts out of highly efficient, lightweight, resource-conserving, high-tech packaging (including plastics and laminates) back into more traditional, heavier, less-efficient but recyclable packaging. That would not be a plus for the environment.

The goal of reducing the need for landfills is questionable as well. Though total numbers of landfills have declined over the past decade, actual capacity has declined only moderately. State-of-the-art landfills, as a 1991 report from the Mackinac Center for Public Policy found, are environmentally sound. Moreover, new regional landfills have about 4 times the capacity of older ones they are replacing. Even with tough new regulations, landfills remain relatively inexpensive: total collection and disposal costs usually range from $70 to $110 per ton, compared to total recycling costs that start at $100 and go to $175 and higher.

Furthermore, ADFs are not likely to strengthen existing recycling programs if they simply support the costly and inefficient investments that routinely characterize those programs now. They may even reduce local government incentives for finding the most cost-effective ways of providing recycling services, such as moving from a two-person to a single-person crew. A fee structure that drives manufacturers to recycle even hard-to-recycle materials may actually drive total costs up and undermine public support.

It should also be noted that recycling markets are fairly robust for packaging materials recycled now. Demand for used corrugated cardboard is high; indeed, used cardboard prices have soared as much as sixfold over the past year. Demand for aluminum cans, clear glass, and steel cans is also strong. Problem markets include those for green and amber glass, and for some recycled plastics. It is difficult to justify a blanket fee structure, or even one that targets individual materials, when markets are developing relatively rapidly through the pressures of ordinary supply and demand.

Managing the waste stream effectively requires a strong reliance on markets and public policies that refrain from adding more burdens than they relieve. Based on those criteria, new taxes in the form of advance disposal fees do not measure up.