Bottled Water Crisis
Well, it finally happened. After years of tremendous marketing, bottled water is taking a hit. Drinking bottled water is being equated with smoking cigarettes and drinking alcohol as an undesirable social activity. Chicago is the first major city to levy a sin tax on each bottle of water sold within city limits. Starting yesterday Chicago will charge a 5-cent tax on each bottle of water sold. Officials predict the tax will yield $10.5 million annually.
The Daily Green lists the seven sins of bottled water:
1. Plastic bottles are made from petroleum.
2. The bottles often go into the trash, rather than the recycle bin (in part because many states don’t offer five-cent deposits to encourage recycling, as they do on soda and beer cans and bottles).
3. The water is pumped far from where it is sold, creating needless pollution as trucks and barges transport it across the country or around the world.
4. Some local communities have objected to the sale of their water, arguing that the water underground or flowing from natural springs is publicly owned and should not be exploited for profit.
5. Bottled water is rarely as closely monitored as tap water.
6. Tap water in the United States, when provided by a municipal system, is the most highly monitored and safe supply in the world.
7. Some of the water sold in little plastic bottles is tap water, but it costs an awful lot more per gallon.
As a result of some of these considerations, I have been trying to get off of bottled water for some time. Bottled water is an excess I can do without. The tap water in Philadelphia is just fine and I am happy to carry around a reusable water bottle. But I know that some people love their bottled water. So let’s consider whether this tax makes sense.
The tax could be aimed at the pollution created by plastic water bottles. If so, the tax is too narrow, because there is no reason to stop at taxing water drinkers. I suspect that more bottles of soda are consumed than bottles of water. And many products come in plastic packages. So why not create a tax on all plastic packaging? Furthermore, it misses some of the pollution because it seems to target the bottles rather than the pollution caused by the transport of water. On the other hand, it may result in fewer bottles being purchased and thus less water being transported.
If the tax is aimed at eliminating the use of an unnecessary and wasteful product given the public water supply, the tax may be better designed, but may not go far enough. Will a 5-cent surcharge really change consumption habits? I don’t know. If it does, how will those habits change? Will people buy larger water bottles or buy less water altogether?
In any event, the tax succeeds on one front. It likely forces consumers to internalize some of the externalities created by bottled water. Professor Annette Nellen from San Jose State has a nice summary of some other considerations about this tax.
I assume that Chicago is constrained by certain state and federal constitutional limitation in what it can tax, but I like this as a first step. I would love to know whether this generates the expected revenue and/or changes any behavior in Chicago. I guess we’ll have to wait and see.