Deposits & Taxes
The Beverage Industry & Beverage Container Deposits
Mandatory deposit programs, more commonly known as “bottle bills,” share several common elements:
- Impose a mandatory, pre-paid fee on certain beverage containers
- Force consumers to drive containers to designated locations to reclaim their fee
- Require retailers or redemption centers to take back returned containers
- Require significant new infrastructure (equipment, staff and facilities) to manage beverage containers separately from other products and packaging
Eleven states have enacted forced deposit programs – all but one of which was implemented prior to 1987. In fact, in 2002, the nation's only municipal deposit ordinance was repealed in Columbia, Missouri. These deposit programs were all established to help reduce beverage container litter. In recent years, however, deposits also have been advertised as a way to increase beverage container recycling.
The Drawbacks of Mandatory Deposits
Deposit systems simply don’t work as advertised. They are a misguided policy choice because they:
- Cost much more than comprehensive recycling or litter control programs, which accomplish the same goals
- Penalize and hinder more efficient recycling programs
- Are inconvenient, particularly compared to curbside recycling programs
- Do little to help the environment as they target such a small part of the waste stream
- Create new environmental burdens from increased fuel consumption and greenhouse gas emissions to return and collect containers
- Impose a hidden, regressive tax on consumers in the form of higher prices
Deposits and Recycling
Beverage bottles and cans have always been a valuable and significant component of recycling programs. The earliest recycling of metals and glass grew out of market-based scrap companies that purchased materials from businesses and consumers. With markets for materials and voluntary participation, recycling programs were economically viable and sustainable.
These principles hold true today, but the economic incentive to recycle has increased as many communities and businesses face much higher waste disposal costs than ever before. The interest in capturing the value of the commodities and diverting waste from disposal led to the establishment of curbside recycling programs in the 1980s, providing collection of recyclables in the same way trash was collected.
Comprehensive recycling programs, like curbside collection, provide an easy and effective way for consumers to recycle their household waste, including beverage bottles and cans.
Yet, some argue that these convenient and effective voluntary programs don’t go far enough. Data shows these deposit programs are costly, inconvenient and compete with more successful voluntary recycling efforts.
Comprehensive Recycling Works
Comprehensive recycling programs provide systems through which households can easily recycle a wide range of materials. Through these programs, households can recycle through curbside pickup or, in smaller communities, drop-off programs. These programs often include an educational component to encourage and build participation.
We know that comprehensive recycling programs are the best way to capture waste conveniently, efficiently and equitably. These programs have expanded rapidly and are extremely popular with citizens and businesses alike for one good reason—they work.
Some states and communities have implemented taxes on nonalcoholic beverages as a way to raise government revenue and fund various programs. But taxing beverages, or any food item, is a poor way for governments to increase revenue, especially in tough economic times.
Voters in Maine soundly rejected a recent attempt to tax beverages to fund state programs. By a 64 to 36 margin in the November 2008 election, Mainers declared that they were "fed up with taxes" and rolled back a tax enacted by the Legislature months earlier. Maine residents understood that beverage taxes are:
- Unpopular - The public views beverage taxes as a tax on food. Even if the taxes are imposed directly on businesses, surveys show that 95 percent of consumers believe they will ultimately bear the burden of beverage taxes, passed on to them by producers and retailers.
- Regressive – Beverage taxes hurt low-income consumers significantly more than others because it raises the price of groceries, which is most harmful to those on fixed incomes. As a result, those least able to afford beverage taxes bear the greatest burden.
- Unfair – Beverage manufacturers and bottlers already pay their fair share of business and other taxes, generating more than $55 billion in revenue annually for federal, state and local governments.
- Anti-business – Beverage taxes raise the cost of doing business, not just for beverage companies, but for their suppliers and retail customers as well. Higher costs reduce reinvestment and job growth – a critical consideration given that the beverage industry directly or indirectly supports nearly 3 million American jobs and $112 billion in wages and salaries.
Today only Arkansas, Washington, West Virginia and the city of Chicago retain discriminatory taxes against beverages. In recent years, the trend has been to repeal or reduce these taxes. In fact, since 1990, 10 states and communities have repealed discriminatory taxes on soft drinks.