Unhappy Meal 

A region that has announced itself as a cultural destination can hardly afford to unfairly tax its service industries.

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Worry not, city councilmen assured their constituents.

It was July 2003 and the council was voting to raise the city meals tax from 5 percent to 6 percent — and to award the 1-percent increase to the private planners of a proposed downtown performing arts center.

The increase will be temporary, they said. “This plan puts responsibility and accountability on all those involved,” then-Councilwoman Delores McQuinn declared in admiration of her own leadership.

“This isn't a 1-percent, 20-year or 30-year tax,” then-Councilman Bill Pantele echoed, with a serious look on his face. “It's going to last until June 2005. At which point the other elements of the [arts center] financing need to be in place. And I think that's wise.”

As we now know, the financing elements for the proposed arts center would not be “in place” — the private foundation pushing the project soon blew through all of the tax money it was given.

Even with all of its lip service about wisdom and accountability, City Council later overrode itself and voted to siphon more meals-tax dollars to the Virginia Performing Arts Foundation. In 2005, then-Mayor L. Douglas Wilder halted the meals tax payments to the foundation, which was forced to downsize its plans.

So what happened to that “temporary” meals tax increase, the one that was supposed to go away once its purpose had been exhausted? Try this: Go out tonight to patronize one of the city's fine restaurants. When the bill comes, take a peek. Make sure you aren't chewing anything — you just might choke.

It's still there.

Yes, eight years after it passed through City Council, and six years after it was supposed to have gone away, Richmond's restaurants still are charging patrons a citywide 6-percent tax on prepared food. That's because former Mayor Wilder decided that he never made promises to taxpayers and the local restaurant industry about the meals tax. He directed that the 1-percent hike become a permanent fixture.

And, it should be noted, many of the councilmen who made the original promise that the tax hike would be temporary — such as Pantele and McQuinn, who's now a state delegate — didn't put up much of a fight.

Virginia's sales tax is 5 percent: 4 percent goes to the state, the rest to the locality. On top of that, cities and counties can levy their own meals taxes. But here's the rub — city governments can do it legislatively while counties must pass it through a voter referendum. Henrico voters were asked what they thought about a 5-percent county meals tax in 2005. They said no thanks to that spicy entree.

As it stands, Richmond's combined 11-percent tax on meals is among the highest in a state that claims to be a low-tax haven that supports business owners; a state with local governments unusually infatuated with these kinds of hikes — fees that are said to target tourists but inevitably hit local consumers and burden restaurants and caterers.

The meals tax is an unaccountable tax. It “shifts the tax burden from property owners to small businesses,” libertarian blogger S.M. Oliva writes. “And since the restaurants collect the tax, the customer-taxpayer never interacts directly with the government, which helps local officials avoid accountability.”

This nonexistent accountability makes it easy for city politicians in places such as Richmond (and Roanoke, which raised its city meals tax to a whopping 7 percent last year) to raise taxes on prepared food without seriously considering the consequences. “They did it because we couldn't stop it,” Rhoda Richardson-Elliot, owner of the local Bill's Barbecue chain, told Style Weekly last year. “If they had put it to a referendum it wouldn't have happened.”

Richmond's combined 11-percent levy puts local restaurant owners at a severe regional disadvantage. Since the increase, numerous restaurants and caterers have gone out of business. While many in the local restaurant community fought the increase in 2003, a much smaller group of restaurant owners affiliated with arts center planners came out in favor of the increase, claiming that the tax would not be a drag on business.

It's worth noting that the owners of Croaker's Spot, among the supporters, were forced to shut down their restaurant in Jackson Ward last year for — wait for it! — not paying meals taxes.

Consumption fees like this are treacherous ground because they place a double tax burden on the restaurant industry. When people purchase goods in a retail store, they pay a sales tax; when they eat out, they pay a sales tax and a food tax. How is this treatment fair to either the industry in question or to the consumer?

Keeping property taxes down is indeed important, but a region that has announced itself as a cultural destination can hardly afford to unfairly tax its service industries and expect visitors to shoulder the burden. Often, they simply go elsewhere.

Out-of-town comments on message boards and websites already warn visitors to avoid Richmond. “Not to worry, folks, it is easy to boycott Richmond hotels and restaurants,” one visitor writes on virtualtourist.com. “The surrounding counties of Henrico, Chesterfield, and Hanover either don't have meals or lodging taxes or theirs aren't as high.”   

There's strained logic behind the pervasive notion that we can build our economy on visitors behaving like unthinking consumers. And studies show that meals taxes target low- to middle-income city dwellers and families — often forced to eat out because of time constraints — every bit as much as visiting tourists.

The time has come for Richmond to take back the 1-percent tax hike. Such an action may not totally cleanse the bitter aftertaste of city meals taxes, but it would show that Richmond politicians know how to keep promises.

That's how you really build a tier-one city.  S

Don Harrison is Style Weekly's arts and culture editor.  

Opinions expressed on the Back Page are those of the writer and not necessarily those of Style Weekly.



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