The economist inside me says it would be better to tax disposable plastic.
The tax could cover the cost to clean up the litter. That would create jobs in three ways: 1) plastic clean-up jobs, 2) businesses and economic activity that desperately need disposable plastic can still possibly survive, and ) jobs making disposable plastic.
Anyways, it's a lot better than taxing things we all agree we want more of. Like jobs.
To be honest I hate this economic idea of enforcing a ban via adding tax to it. This ideology shows the lack of understanding of the disparity in income in India. The middle class and below are the most affected and they face the most brunt of all this.
The same goes with how the govt. keeps adding tax on tobacco and its products every year. Forcing people to stop smoking by not allowing them to buy despite allowing it to be sold in open market is just one way of violating ones freedom to choose. I do not support nor encourage smoking but I do not like the idea of forcing people to stop smoking by making it expensive, tobacco industry brings a lot of revenue to the govt, the govt just doesn't want to stop it so they enforce such taxes so the govt. earns the same but the intake by people is reduced. This isn't a win-win by any means. People will still die of cancer no matter how moderately they smoke. The problem isn't solved here its just reduced by probably 10% but the revenue from it is still 100%.
I am pretty sure a lot of people will just reduce other expenses to compensate. At least for as long as they can. That just means most of the money goes to tobacco companies instead of anything else they would have spent it on.
I think I agree with vidyesh, taxes are for money not for changing social behavior.
>I am pretty sure a lot of people will just reduce other expenses to compensate. At least for as long as they can.
We don't have to idly speculate this, the phenomenon is called elasticity of demand in economics, and not only are there good estimates of elasticity for various products, there's a rich set of ideas that have been developed around elasticity, including what happens when you tax goods of various elasticities.
I highly recommend looking into the details yourself (any intro micro economics textbook will cover it), but the upshot is that cigarettes judged to have relatively inelastic demand, which is basically what you had said. This means that a tax on the product will not reduce the equilibrium quantity consumed by very much. A corollary is that the majority of the tax burden will fall on the consumers of cigarettes. I'm not sure why you said "most of the money goes to the tobacco companies"-- with all tax levels the revenue goes to the government.
> To be honest I hate this economic idea of enforcing a ban via adding tax to it. This ideology shows the lack of understanding of the disparity in income in India. The middle class and below are the most affected and they face the most brunt of all this.
A ban just means everyone feels the same level of pain as the poor--so net, more pain--without the gains of tax revenue.
> The problem isn't solved here its just reduced by probably 10%
A tax is about internalizing the negative externalities. If we price in the cost of cancer (and the hyperbolic discounting of my cancer being way of in the future), and I still decide it's worth it to me, then let me smoke in exchange for funding public health initiatives that will fully offset the societal cost.
Then the tax was not high enough. The role of government should not be to use heavy-handed rules that arbitrarily distort market and place limits on freedoms. It can work out better for everyone to govern the externalities of human behaviour through market incentives. Everyone can win in that situation. People that still really need disposable plastic can still buy it if they need it that much. In other words, there is a price equilibrium where the cost of plastic pollution to society is less than the revenue generated by plastic goods consumption.
One of my favourite examples of this concept is marijuana laws in Colorado. 1 BB in gov rev, 200 MM in tax rev alone. Less spent on law enforcement. Less crime due to a black market. Less innocents in jail that are spending tax dollars instead of producing them. Everyone wins except the DEA and prison system.
> People that still really need disposable plastic can still buy it if they need it that much. In other words, there is a price equilibrium where the cost of plastic pollution to society is less than the revenue generated by plastic goods consumption.
Your theory is correct, but you're not taking into account that, in Delhi, it's far easier (read: cheaper) to enforce a ban on the sale/use than it is to ensure tax compliance.
Delhi proper is twice the population of Colorado, and the metro area has four times the population of Colorado. Combine that with a relatively porous implementation of laws, and it's just way easier to go for a complete ban.
>Your theory is correct, but you're not taking into account that, in Delhi, it's far easier (read: cheaper) to enforce a ban on the sale/use than it is to ensure tax compliance.
I don't want to believe it, but unfortunately I think you are correct. Too many times utopian policies are made unrealistic by human nature.
> Too many times utopian policies are made unrealistic by human nature
Agreed. But a less cynical way of thinking about it: Just think of it as a second-order model, with an additional equilibrium factor to consider. What is the cost of complying with the policy, traded off against the risk and expense of getting caught?
That's not actually a factor unique to Delhi; it just happens that the risk of getting caught and the expected expense[0] is a lot less than the expected risk/cost of getting caught for not paying Colorado sales and excise taxes on marijuana.
[0] which can include social engineering or bribery
> Just think of it as a second-order model, with an additional equilibrium factor to consider.
I think that has clear, pragmatic value. That's the perspective which exists in academic economics. However, I feel that there has to be some point where we just have had enough and say, people need to stop being so awful? Or, at the end of the other side of the spectrum, perhaps we should live in a world where everyone is legally selling each other their organs--there's a balance in there somewhere where we need to have a certain faith in humanity.
If you make tax too high then people would steal. They would buy without receipts etc. Better to ban inflow of plastic consignments of plastic, close plastic factories in city limits and keep a tab on businesses. It works decently in Bangalore.
> The tax could cover the cost to clean up the litter. That would create jobs in three ways: 1) plastic clean-up jobs, 2) businesses and economic activity that desperately need disposable plastic can still possibly survive, and ) jobs making disposable plastic.
Enforcement of a ban will likely come through a fine, which will have the same effect. Think of the ban as a very large excise tax. Plus, the ban only applies to certain plastics, not all plastics - you could tax those at a reasonable rate for revenue.
Secondly, you don't really need to pay people to do cleanup. The very poor in India already rummage for plastic material and recycle that as a means of income. The problem is that, before the ban, the amount of material disposed was too high. Once you stop the inflow of new trash, cleaning up the rest is pretty tractable.
This also happens in New York City. On trash day people will systematically rummage through the garbage that is placed on the curbs and pull out all recyclable plastic bottles and cans:
Yes, that happens everywhere that practices bottle deposit refunds. But what I'm talking about goes even further - people will rummage plastic bags, even, which I've never seen in NYC or the US at all.
We're talking about a place that got rid of entire cash denominations to help them collect income tax. They can't even come close to enforcing their existing tax laws. What makes you think they could enforce new ones?
The tax could cover the cost to clean up the litter. That would create jobs in three ways: 1) plastic clean-up jobs, 2) businesses and economic activity that desperately need disposable plastic can still possibly survive, and ) jobs making disposable plastic.
Anyways, it's a lot better than taxing things we all agree we want more of. Like jobs.