A Nickel Isn’t Worth a Cent

Why the bottle deposit should be much, much higher.

Recycled plastic bottles
Despite several decades of inflation and a major shift in what and how we drink, the nation’s bottle bills have barely changed

Photo by Justin Sullivan/Getty Images

In the early 1980s, when I was a little boy in New York City, a subway trip cost 75 cents, a slice of pizza was 90 cents, and the deposit on a can of beer or soda—the fee you pay upfront and get back when you bring in your empties for recycling—was 5 cents. This summer marks the 30-year anniversary of New York’s “bottle bill,” and times have changed. A subway ride now costs $2.50 and a slice of pizza starts at $1.50. The deposit for a bottle, though? Still a nickel.

Despite several decades of inflation and a major shift in what and how we drink, the nation’s bottle bills have barely changed. When the first deposit was enacted, in Oregon in 1971, the redemption rate was set at 5 cents per can or bottle. The concept—and the nickel-rate—spread in the years that followed, first to Vermont, Maine, and Iowa, then bigger states like California and New York, until bottle bills covered one-fourth of the U.S. population. Almost every state that had deposits copied Oregon’s incentive. (Michigan remains the only outlier; its deposits have always been a dime.)

The laws’ indifference to the cost of living is absurd. In the time since deposits were invented, their value has declined by 83 percent: Today’s nickel wasn’t worth a penny in 1971. (The average yearly wage back then was $6,500; today it’s $43,000.) If state governments had thought to peg their bottle bills to inflation, we’d now be paying almost 30 cents on the cost of every single can, or an extra $1.80 for a six-pack. But it’s not too late to make up for this oversight. Restoring the oomph to bottle regulation would do more than satisfy our common sense. It could improve the public health.

The most obvious benefit of sextupling deposits would be environmental. Bottle bills were put in place to lighten loads in landfills. The scheme works in two ways: First, it discourages consumption, since at the cash register, the deposit looks like a tax on beverages; second, it promotes good behavior, since those who recycle their containers get a rebate. The higher the deposit, the more effective it becomes. According to figures from the Container Recycling Institute, states that charge a nickel have redemption rates between 61 and 90 percent; in Michigan, where the deposit is a dime, the rate is 95 percent.

Jacked-up deposits might also change what we choose to drink. Bottle bills don’t apply to every beverage; at first they applied to beer and soda (and sometimes wine), but nothing else. At the time when these laws were passed, these beverages made up the great majority of our packaged drinks. In the past two decades, though, other categories have gotten much more popular. Of the 192 gallons of “liquid refreshment” now consumed by the average American every year, beer and soda represent one-third. Bottled water accounts for 16 percent, with coffee, tea, and milk making up a substantial portion of the rest.

Bottle deposit
The bottle deposit should be much, much higher.

Photo courtesy Daniel Case/Wikimedia Commons

In recent years, environmental groups have pushed to have the laws cover bottled water, too. (This month in Massachusetts, activists petitioned to put the issue to a public vote.) Even so, of the 10 states with bottle bills, four still restrict their rules to booze and soda. Their deposits function as a sin tax, boosting prices only for the drinks considered bad for health. That is to say, deposits are in keeping with the logic of an excise tax for unhealthy beverages. (States that add water to their bottle bills also have inflated costs for soda, regardless of any premium for water that isn’t from the tap.)

So far, attempts to raise the price of soda haven’t done much to change behavior, in part because the most aggressive laws—the ones that would affect consumption—have been shouted down. (Existing soda taxes are way too subtle, as a rule, to influence consumers. They’re used for raising revenue, not changing what we drink.) In New York City, Michael Bloomberg tried and failed to add a soda tax of 1 cent per ounce. But for New Yorkers drinking soda out of 12-ounce cans, the state’s bottle bill gets you almost halfway there: The extra nickel adds a cost of 0.42 cents per ounce. If New York’s deposit were raised to 30 cents, in keeping with inflation since 1971, the effective tax on soda would increase to 2.5 cents per ounce—a more effective tax than the one that Mayor Bloomberg hoped to get.

The fact that bottle bills are already on the books may give them some political advantage. A de novo tax on sugared drinks may come off as nanny-state meddling or a fresh incursion into our consumer rights. An upgrade of deposits, though, modifies a program that we have already. And any increase to the cost of soda would seem less offensive if it’s offset by a higher rebate for those who bother to recycle.

For the beverage industry, a souped-up deposit program would have some benefits as well. At the very least it wouldn’t be as threatening as a naked soda tax. While proceeds from an excise tax are always taken by the government, bottle bills allow more flexibility. When empty soda cans end up at the landfill, the bottlers and distributors end up holding lots of unclaimed 5-cent rebates. These orphan deposits flow into a pool of money—tens of millions of dollars, in most states—that can be shared between the government and the industry according to the local law. In some states with bottle bills, some or all unclaimed deposits are handed over to the bottlers and distributors. (Beverage companies can also earn some money from a deposit program by investing nickels before they have to pay them back.)

Recycled bottle collecting in New York City
In the time since bottle deposits were invented, their value has declined by 83 percent

Photo by Spencer Platt/Getty Images

Raising the price of soda is also better for the poor. I’ve been opposed to a tax on soda on the grounds that it’s regressive, since lower-income families spend more money on carbonated soft drinks than any other group—both relative to their income and in absolute terms. (As important, it redistributes pleasure from poor to rich.) A bottle deposit would have the same effect as a soda tax at the register, hurting poor people with higher prices, but it does less damage to the needy overall. Those most affected by the change in soda’s cost would also have the most incentive to recycle their containers and claim the higher rebate.

The deposit program also serves to transfer wealth from rich to poor. Bevin Ashenmiller, an economist at Occidental College in California studied bottle-recycling behavior around Santa Barbara and found that families making less that $10,000 earned an additional $340 by redeeming scavenged empties—a significant increase to their yearly earnings. All told, households making less than $25,000 took in 58 percent of all the money from deposits.

That transfer might be lessened if we raised the bottle rates to 30 cents. Since people would recycle more, fewer cans would be left for people to scavenge. “You can think of the cans as a fishery and recyclers are harvesting the cans,” Ashenmiller explained via email. A higher deposit would shrink the fishery, but with higher prices it would still provide a source of money for those who need it most. “I would hypothesize that the hourly wage of the recyclers would go up at first,” said Ashenmiller, “then fall over time. In equilibrium it would probably end up around the minimum wage.”

Naturally, the 30-cent deposit isn’t perfect. As a stand-in for a soda tax, it has the flaw of being hard to see. Sean Cash, a specialist in nutrition policy and economics at Tufts University, notes that the extra nickel now in place rarely shows up on price tags. Most of the time, it’s added to the cost of a can of soda or a bottled water only when you’re about to pay. Small and sneaky taxes don’t do so much to influence behavior.

A honking, 30-cent deposit would be harder to ignore, even if it weren’t on the price tag, but even so it’s hard to know how consumers would respond. While people might buy fewer cans of soda, the law would encourage them to buy in bulk. (The 30-cent tax would be the same for a two-liter bottle as it would be for a tiny, 9-ounce can.) According to Cash’s research, though, the price of soda already varies quite a bit depending how and where you buy it: At a vending machine, you might pay as much as 11.5 or 12 cents per ounce, while at a drugstore you can sometimes get it for 1.5 cents per ounce.

In any case, the goals of environmentalism and those of public health aren’t well-aligned: Cash himself points out that greens encourage you to buy in bulk to cut down on extra packaging, while doctors warn it’s best to take your drinks in smaller cans and bottles, which provide a natural stopping point. But a bottle bill doesn’t have to say which group is right. If the laws were made as strong today as they were in the 1970s—if the deposit were taken from a nickel up to 30 cents—we’d either get more recycling or less consumption, or a little bit of both.