Montgomery County officials are working to learn from their mistakes after a June report from the Office of Inspector General revealed the county lost up to a potential of $8.2 million from not properly enforcing its plastic carryout bag tax that was passed in 2012. Part of the issue? The county doesn’t have a complete list of which businesses aren’t collecting the tax.
“This is not an easy one,” councilmember Sidney Katz (D-Dist 3) said at a meeting of the council’s audit committee Thursday to address how the county can properly enforce the tax.
County retailers such as grocery stores, convenience stores and restaurants are required to charge a five-cent tax on single-use plastic and paper bags since the County Council passed a bill in 2011 “to help fund the county’s stormwater management program to support the goals of a cleaner environment,” according to the report.
The tax was also created to encourage residents to use their own reusable bags when shopping and limit plastic waste, according to the OIG.
Retailers collecting the tax must remit four cents to the county but can keep one cent in order to recoup administration costs of complying with the tax. The tax revenue is put toward the county’s Water Quality Protection Charge fund, which is overseen by the county’s Department of Environmental Protection (DEP). The fund is used primarily to clean county waterways of litter, according to the OIG report. DEP is also responsible for managing the tax collection.
But the OIG found that not only were many county businesses not collecting or remitting the tax, the county didn’t have an efficient way to identify businesses that had never remitted the tax.
“There are a number of data limitations in the system that is used to track this back tax, which makes enforcement very challenging,” Inspector General Megan Davey Limarzi said Thursday.
“For example, an owner who owns numerous locations of a business may have them all under one account, so there’s no way to really be able to track whether they are remitting for every location or just one.”
DEP does not have a complete list of every business in the county that should be collecting and remitting the tax.
Council Vice President Andrew Friedson (D-Dist. 1) said not having a complete and accessible list of county businesses has been an issue across departments and legislation in the county, not just the carryout bag issue.
“In all kinds of different scenarios, we need lists of businesses, and the idea that individual departments have to put together their own list is part of the problem,” Friedson said. “It’s not a DEP problem. It’s a county government problem.”
While a fine of $100 for first offenses and $750 for second offenses is intended to penalize businesses that violate the law, Department of Environmental Protection division chief for strategic services Vicky Wan said Thursday that the fine has never been enforced, either.
“We try not to penalize, but to educate prior,” Wan said. “Right now, we’re very focused on education and outreach to ensure that all of the businesses and all of the cashiers that they hire know that this law exists.”
The OIG estimates the county has lost out on at least $210,000 per year since the law went into effect in 2012 but could have experienced a potential total loss of over $8.2 million over 10 years, since businesses were not remitting the tax to the county.
“This is a county government that likes to regulate a lot of things. And we have to be able to communicate with businesses on what we’re expecting of them. And if we don’t, if we don’t know who they are, we can’t communicate with them. I think that is a major problem,” Friedson said.
In April, the DEP hired a full-time staff member dedicated to the carryout bag tax, which DEP Director Jon Monger said has helped the department work closely on the issue.
Council President Evan Glass (D-At-large) said that on the consumer end, the county needs to assess whether the tax is encouraging customers to bring their own bags.
“If the goal is to deter plastic bag usage, there are two avenues to go down,” Glass said. “One is to ban plastic bags entirely as other jurisdictions have done, or recognize that five cents is not a deterrent, and increase the fee to change.”
Friedson agreed that it’s important to address the ultimate goal, which is to decrease plastic bag use rather than to increase tax revenue.
“I fundamentally don’t believe that this tax is intended to generate revenue. That’s not its primary purpose,” Friedson said. He said back taxes “overwhelmingly” change people’s behavior.
“You go to any grocery store in the county and you will see people bringing those reusable bags, including me,” Friedson said. “I think it’s important when we talk about this that we understand what the actual public policy goal is.”