Montgomery County hasn’t properly enforced its carryout bag tax, resulting in thousands and potentially millions of dollars of lost revenue for the county, according to a report released earlier this month from the county Office of the Inspector General (OIG).
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.
County retailers such as grocery stores, convenience stores and restaurants have been 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.
In a written response to the report, county Chief Administrative Officer Richard Madaleno said he and the Department of Environmental Protection would heed the recommendations, but that he wasn’t sure the figures cited for potential revenue loss were accurate since they were based on speculation.
“We believe that caution should be exercised concerning some of the retailer and potential tax revenue numbers reflected in the report, since these are speculative and may overstate the actual numbers,” Madaleno wrote.
The OIG responded to Madaleno’s letter, saying the office wants to see more concrete action plans from Madaleno’s office and the Department of Environmental Protection to oversee the law and its effectiveness.
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. The fund is used primarily to clean county waterways of litter, according to the OIG report.
“This report is exactly why we have an inspector general who looks into these issues, and this is just an example of how important the work of that office is,” said Councilmember Kate Stewart (D-Dist. 4), a member of the council’s transportation and environment committee. “I look forward with following up with staff and working on addressing this, because we can’t continue the way we were going.”
The OIG report found that not all retailers who are required to collect the tax are doing so, and that some retailers that are collecting the tax are not remitting the collected tax revenue to the county. The OIG concluded that part of the reason retailers have gotten away with not properly collecting and/or remitting the tax is because the county does not have strong processes in place to collect and monitor data on retailers required to comply with the tax.
According to the OIG report, the $8.2 million estimate comes from assessing more than 2,100 retailers that have not been complying with the law. The OIG stated if these retailers had complied, the county would have collected a minimum of $210,000 per year.
Currently, only 1,951 retailers are registered in the county’s bag tax system, while the OIG has identified a total of approximately 3,800 retailers that should be collecting the tax, according to the report.
The existing system also makes it difficult to analyze information from retailers that are in the system, the report said. The OIG went as far as calling the process “weak” and “mild,” per the report. For example, one retailer with multiple business locations could file all its tax remittance information in one entry, without specifying specific business locations where the tax was collected. The system also does not require the retailer to submit supporting documentation to prove the tax was indeed collected and remitted to the county, according to the report.
The report said the county has not “undertaken a comprehensive effort to regularly assess the tax’s impact on the amount of litter in county waterways or consumer behavior” and recommends the county create a process to monitor and collect data on the tax, identify and create a process for tracking retailers that are required to collect the tax, and reach out and work with retailers who have either not been collecting and remitting the tax or have been doing so improperly.
Other recommendations from the OIG include pursuing fines for retailers who don’t comply with the law, requiring greater tax collection and remittance documentation from retailers, and performing an assessment on whether the tax has an impact on single use bag use and consumer behavior.
The OIG also cited a 2018 study conducted by CountyStat, the county’s performance management and data analytics team and a group of University of Maryland graduate students that found the law resulted in an initial decrease in plastic bag use after the law was first passed, but has not had greater or increased impact on consumer behavior in the years since.
The Department of Environmental Protection has recently hired a staff member in charge of overseeing the bag tax.
Currently, county residents can report potential violations of the bag tax on the county website.
Montgomery County Council President Evan Glass (D-At-large) said during a media briefing Monday that he’s requested a briefing on the report for the council’s transportation and environment committee to discuss the application of the regulation and how to improve it.
“We know that we need to reduce single use plastics, that’s why we adopted the bag tax more than a decade ago. It’s the reason why we have effectively banned the use of plastic straws in our eateries and are working to reduce our waste stream and many other areas,” Glass said. “So, this is part of a broader conversation about how we provide more recycling, how we provide more composting and have an overall decrease in our waste. And so, I will be having a [transportation and environment committee] session on this to figure out how we move forward and how this law and regulation can be better.”
