Because bottled water's costs to society far outweigh its benefits, state and local governments should discourage consumers from buying it by levying a sales tax on it. That's the argument Laura Bliss makes at Atlantic Media's CityLab site.
According to Bliss, society should be able to recover bottled water's "enormous" environmental, social and ethical costs, a policy that she says has proven effective. A study in Washington state found that bottled water consumption fell 6.4 percent after a bottled water tax was passed in 2010 (it was later repealed). Bliss cited data from the Pacific Institute think tank finding that Chicago earned $38 million from the bottled-water tax it enacted in 2008.
"Bottled water is often called a luxury, but that's not quite right -- so-called 'luxury' items like furs and fancy jewelry are considered luxuries in part because they're made of rare or difficult-to-obtain materials," she wrote. "In the U.S., water is not rare or difficult to obtain. ... Yet we are willing to pay for the bottled stuff, at a price anywhere between 240 and 10,000 times more than the price of tap water."
Environmentally, the industry is problematic. As Bliss noted, landfills are overflowing with recyclable plastic water bottles because only about 13 parent of them are ever repurposed into something else. She added that annual consumption of bottled water requires the equivalent of 32 million to 54 million gallons of oil.
However, tax experts such as Joseph J. Thorndike of Tax Analysts have qualms about using government levies to change people's behavior. And he told CBS MoneyWatch that taxes on bottled water would disproportionately hurt the poor.
"Any amount of money, say a dollar, if it's given up by someone who is making $15,000 a year is going to be a lot more painful than it is for someone who makes a million dollars a year," said Thorndike, who wrote an article critical of Bliss' proposal. "Normally, we try to avoid that with taxes. Big taxes like the income tax are designed ... (to be) progressive. Rich people pay more in relation to their income than poor people pay in relation to their income."
Chris Hogan, a spokesman for the International Bottled Water Association, argued in an email to CBS MoneyWatch that additional taxes would place an unfair burden on the industry.
"To claim that a specific healthy, reliable product on which many consumers rely -- and in doing so, often replace less-healthy, sugary packaged beverages -- should be taxed simply because it exists is illogical," he wrote.
While Thorndike is sympathetic to Bliss' argument, he says it raises broader questions about the role of tax policy, which have no easy answers.
"I don't have any great love for bottled water," Thorndike said. "I think we should all be drinking water out of our taps. That doesn't mean we should be using the tax system to fix the problem. We could come up with a thousand things like this that we don't think people should be doing."