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Wednesday, June 18, 2014

Task force fails to reach a consensus on a meals tax referendum

An anti-meals tax sign at Silverado's in Annandale. Many restaurant owners oppose a meals tax, while advocates for more funding for schools, libraries, the arts, and social services support it.
A task force appointed by Fairfax County Board of Supervisors Chair Sharon Bulova to consider whether a meals tax referendum should be put on the ballot failed to reach a consensus. The group’s report, presented to the BoS June 17, outlines the pros and cons of establishing a meals tax but doesn’t make a recommendation.

The BoS deferred action on a meals task until supervisors have a chance to review the report in more depth.

The task force, co-chaired by Kate Hanley and Tom Davis, had been charged with considering whether a tax on restaurant meals should be imposed and if so, what year a referendum should be held and how the revenue should be used.

A meals tax would apply to all prepared and ready-to-eat foods and beverages sold at restaurants, grocery stores, delis, convenience stores, theaters, and other businesses. It would not apply to regular grocery items. While the governing bodies of cities in Virginia may impose a meals tax, counties can only do so through a public referendum.

The maximum tax allowed would be 4 percent, which would generate approximately $90 million in revenue the first year. A 1 percent tax would generate about $22 million.

The task force report includes the following arguments in favor of putting a meals tax to voters:

•  The county needs more revenue. “During the recession, important services have been cut, county and school salaries have stagnated, and schools have been underfunded,” the report states. The revenue generated by a meals tax could also support the county’s infrastructure needs, as well as human services, health services, the arts, libraries, parks, and other areas that have been underfunded.

•  A meals tax would diversify the county’s revenue stream. More than 60 percent of revenue comes from real estate taxes, “placing most of the tax burden on the county’s homeowners.”

•  It’s been estimated that 28 percent of those who would pay a meals tax would be non-county residents. Large events that draw lots of visitors would provide an opportunity for increased revenue.

Nearly all the surrounding jurisdictions—including Arlington, Alexandria, Fairfax City, and Falls Church—plus the towns of Herndon and Vienna—have a meals tax, which Fairfax County residents pay when they dine out in those areas. “There is little evidence that consumers decide where to eat based on whether there is a meals tax or not.”

•  There are economic benefits from levying a meals tax. Diversifying the tax base could result in lower real estate tax rates, for example, which would encourage businesses to locate here or expand, leading to additional jobs. 

•  A referendum on levying a meals tax gives voters a direct opportunity to decide the issue. Public opinion might well have changed since the last time meals tax was on the ballot. [In 1992, a meals tax referendum failed with 58 percent voting against it.]

The task force report presents the following arguments against a meals tax referendum:

• “The county does not need more revenue. A main driver of Fairfax schools and county budget increases is employee compensation.” Residents are overtaxed, and the county should manage existing resources more efficiently.

• A meals tax would increase the tax burden, particularly on lower-income residents and senior citizens who eat out more often.

• A meals tax would unfairly target the food services industry. Restaurants, which already have low success rates and face other rising costs, would have to spend money to implement a meals tax and would lose their existing competitive advantage against restaurants in areas that don’t have the tax.

•  Putting the issue on the ballot incurs some cost for taxpayers, whether or not the referendum is successful. And if it fails, it’s unlikely to be considered again for a long time.

The task force members agreed that if there is a meals tax referendum it should not be put to voters in a special election. Assuming there is a decision to have a referendum, they disagreed on whether it should happen during the 2014, 2015, or 2016 elections. They outlined the pros and cons for each of those options.

Among the task force members who support a referendum, there was a consensus to dedicate the proceeds to specific uses and not put the money into a general fund. 

9 comments:

  1. It seems cruel to arbitrarily single out one industry--especially an industry that struggles to to make a profit--and say "We've decided that you're going to sacrifice your money to solve our financial problems." It's as arbitrary as choosing nurses to make the sacrifice. Or hairstylists. Also, I have doubts that this would offset/lower our real estate taxes. Historically, no matter what new tax revenues are added to the treasure chest, nothing inspires them to reduce the other taxes. I mean, come on. Who are they kidding?

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  2. It's hardly "cruel" to levy a meals tax. Jurisdictions across the country do so and their restaurant businesses haven't been deep-fried. Really-just look at the photo with this article -- Do you really think Silverados will go away if there's a meal tax. I certainly don't. The benefits far outweigh the risk that we'll lose a few eateries.

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  3. Any idea what the pro tax people wanted to specifically earmark the tax for

    Thanks for all the work you do

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  4. I have no problem at all with a meals tax in Fairfax County. In my opinion, it levels the paying field across Northern Virginia. As a resident of Fairfax County, who works in Arlington County and has a spouse who works in Alexandria City, it frustrates me that when we go to lunch during the work day we are sending our tax dollars to these jurisdictions but when their residents come to Fairfax County, we don't collect a meals tax. As stated above, 28 percent of a Fairfax County meals tax revenue would come from non-residents.

    Furthermore, is there any real evidence that this significantly harms the restaurant business? Are there examples of restaurants relocating to Fairfax County to avoid this tax in neighboring jurisdictions? I'd be open to reconsidering my opinion in the face of such evidence.

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  5. A BIG "THANK YOU" to the 4 comments above, they are the most level headed I have seen on this much needed tax. Please take your recommendations/anger to the General Assembly in Richmond and let them know that you & most Fairfax home owners want the County to have other tax generators. About 2/3 of the taxes come from land/home owners --- its time to allow the apartment renters and trailer park residents to contribute their "fair share" of tax revenue. A meals tax is the FAIREST tax possible!!!
    PLEASE tell your Supervisor that you demand the Meals Tax to level the taxing in Fairfax County !!

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  6. Did it occur to anyone that maybe the County needs to operate more efficiently and reduce costs rather than some up with new ways to gouge the citizens? Start by looking at the immigration issue which is virtually ignored on this blog.

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  7. The Annandale Blog mentions immigration, but does it ever call out the connection between uncontrolled (aka "illegal") immigration and the other problems Mason District faces, such as school overcrowding and zoning enforcement?

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  8. I support the meals tax. As said before, we are already paying it at neighboring jurisdictions. We don't even really notice it or think about it when deciding where to eat. I don't think to myself "I will not eat in Falls Church City because they charge a restaurant tax". Think of all the visitors that come through Fairfax County - they will also be contributing to the funds raised by the meals tax.

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  9. I'd support this just to spite the morons who claim that Fairfax County has a competitive advantage over other areas by not having a meals tax. As if people in Arlington drive out to Fair Lakes to eat just to avoid the meals tax in Arlington. Riiiiight. And even if there is a competitive advantage, who benefits from it? Nobody but the restaurant owners as far as I can tell.

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