Schools

The 411 on the Meal Tax

So, there is a LOT of information out there about the meal tax. Many in support and many opposed. Democrats and Republicans on both sides. Restaurant owners on both sides. I’ve been talking to a lot of the folks about this issue and I wanted to write up a quick summary as I see it.  I have decided not to directly quote or mention the names of patrons and restaurant owners because this is such a controversial issue.  However, you can see some of the supporters and detractors in the links I’ve provided.

First, what is It?

The meal tax is a tax that is levied when you dine in at restaurants and when you buy prepared foods from places like the grocery store and convenience store.

How does it work (sales tax + meal tax = total tax)

To put things in perspective, I think it’s important to understand what the current sales tax rate is in Richmond City. Richmonders currently pay a 5.3% combined (state + city) sales tax rate. The 5.3% you pay in taxes right now makes Richmond’s sales tax rate one of the lowest in the entire country. In fact, there are only 3 other cities, with populations over 200k people, that have lower sales tax rates. (Tax Foundation 2016)

So, when you combine the sales tax with the meal tax you get the combined tax you pay on dining out and prepared food. A total of 11.3% as it stands right now.

Many have suggested that the current meals tax is already one of the highest in the country. In truth, there doesn’t seem to be a lot of conclusive evidence to support this one way or the other. One often cited study is this one: (Top 50 Cities Meal Tax Analysis). However, that study only looks at the most populous 50 cities in the country which doesn’t include Richmond.

Who Decides

Virginia cities and counties have different structures to levy meal taxes on residents. In a county, the tax must be put on the ballot and approved by a majority vote (58.1-3833) (Counties want Right to Raise Tax). However, in cities, like Richmond, all that is required is a vote by City Council.

What’s being Proposed

The current proposal by Mayor Stoney, and being voted on by the City Council, proposes a 1.5% increase to the Richmond meal tax. That would make the total meal tax 7.5% and your total tax on food 12.8%. (From the Mayor’s Office)

However, and this is important, the 1.5% is going into a special fund ONLY for school infrastructure (at least for the moment – see Cons: The History of the Meal Tax).

Examples: On a $100 food purchase you would currently pay $111.30 after tax. After the tax increase that would go up to $112.80. Or if you like cheaper food and you purchase $10 worth of food you currently pay $11.13 and after the tax increase, you would pay $11.28.

Cons – Who Opposes it and why

First, we’re going to start with the cons. I talked to a lot of people and as you might guess there were many people from all different backgrounds that opposed the tax.

  1. Some people oppose taxes on principle.
  2. Restaurant owners say the tax will hurt businesses and keep them from being competitive (http://www.stopthefoodtax.com/).
  3. You also have a population that opposes any sort of regressive tax. There is general thinking that taxes such as these, on goods, disproportionately affect poorer families. The logic behind this is that a person doesn’t generally dine out in direct relation to their income. What I mean by this is that wealthy individuals aren’t dining out 100% of the time and poor individuals don’t just stay home and never dine out. The result is that, in proportion to their income, poorer individuals spend much more on dining out than their wealthier peers (USDA on Engel’s Law).
  4. Many residents see the Richmond City government and school system as being extremely inefficient. They would like to see efficiencies put in place and the money squeezed from the budget in other places.
  5. Other Richmonders simply don’t trust the government ESPECIALLY when it comes to the meal tax. To understand that you need a little history lesson.

Cons: The History of the Meal Tax in Richmond

The original meal tax dates back to 1969 and was 1%. The tax rate was gradually increased over the years and reached 5% in 1991. The 5% rate was in place for 13 years until 2003. (Richmond Magazine 2008). In 2003 the city proposed an additional, temporary increase, to the meals tax to fund the development of Richmond Center Stage which is now the Dominion Performing Arts Center. However, when this temporary 1% increase was set to expire the city council unanimously voted to leave it in place. This was back in 2006.

This failed promise left a bad taste in the mouths of many Richmond residents and that carries on to today for the residents that are still here 12 years later.

Pros – Who Supports it and Why

There are a lot of people that supported the meal tax increase. These ranged from the obvious, like the Mayor who made the proposal to restaurant owners. You can learn about some of the supporters here at http://rvakidscantwait.com/.

  1. Raising the meal tax an additional 1.5% will generate an additional 9.1 million in revenue each year for the city and immediately increase the city’s borrowing limit allowing them to fund $150 million in new school construction and renovation.
  2. The meal tax is a luxury tax. This is a disputed assertion, but the idea is that it only affects people that dine out which, in theory, are people with more disposable income.
  3. It’s better than a general sales tax increase or property tax increase because:
    1. It, in theory, affects the rich more than the poor (see #2 above)
    2. It’s also funded by tourists and people that don’t live in the city which wouldn’t be the case for a property tax increase.  This lessens the overall burden on city residents.
  4. It’s a minor increase. Many people I spoke to that were in favor of the increase, including many restaurant owners, said that adding 30 cents to a $20 bill or 60 cents to a $50 bill isn’t going to make a huge impact on diners or their bottom line.

Summary

As you can see there are pros and cons to an increased meal tax hike and both sides make excellent points. One observation I made is regarding how long people have lived in Richmond. People that have moved here in the last 10 years didn’t truly have an awareness that there was an existing meal tax. So, to them, increasing the meal tax by 1.5% was often-times a non-issue (this certainly didn’t apply to everyone).

However, the opposite was true of Richmonders that have been here since 2003 when the 1% “temporary” tax was put in place. They’ve heard the city’s promises about devoting the increased revenue to specific projects before and want to know why this time is different.

Both sides always agreed that our Richmond Public Schools are in desperate need of attention. The question is how to go about making those improvements. Do the current plans do enough? Should there be more consolidation? And how are we going to fund the developments and renovations?

One thing this Richmonder knows is that the Mayor, City Council, and School Board members have their work cut out for them.

Currently, City Council has this item on their agenda for February 12th, 2018. Officially called Ord. No. 2018-017

You can attend meetings, write your City Council Reps., and also sign the petitions supporting or opposing these causes.

City Council Meeting Dates

City Council Contact Info or City Council District Map

Opposing Petition: http://www.stopthefoodtax.com/

Supporting Petition: http://rvakidscantwait.com

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Examining the Meal Tax Increase | The MatchJason Paul SmithTeresa Nieding CarrelDubois2ML Recent comment authors

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Emily Klinedinst

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Carmen Emborski Pekarek

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Christine Lockerby

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Karen Smith
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Why don’t they allocate the funds to schools from the 1% "temporary"’tax they added in 2003 which was supposed to be only temporary?

MJR
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MJR

If they instead just raised the base city sales tax by 0.25% would that have raised more money for schools and targeted our restaurant industry less? I’m curious why Stoney didn’t offer that as an option? Does raising the base sales tax require a ballot referendum?

Carmen Pekarek
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Carmen Pekarek

Thank you for your research and concise analysis of this issue! You and CHPN are an asset to our community.

UH
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UH

Super clear and informative, Jacob – thanks!

Neighbor
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Neighbor

Money is not going to solve the education challenges in Richmond. Lack of funding is not the problem, lack of discipline and a culture that respects achievement is.

Families need to be able to use the cost of education per pupil currently being spent and take ownership of their own destiny. Library cards are free, most people have an smart phone and access to the internet, but as a society we are more ignorant than ever.

Stealing more from the productive segment of society through taxes, to support the imbecilic is never the answer.

Chris Dosier
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Chris Dosier

I do not see why we can’t both raise the meals tax and squeeze money out of the city budget. The two are not mutually exclusive. The city budget is ~$700M, a 1.5% decrease in the budget would be ~$10M. This would nearly 1 to 1 match the projected tax revenue of $9M the meals tax increase will generate. The city has to put some skin in the game to garner any credibility that this money will go directly to the schools and not the general fund to be misappropriated. As for your point #4 under Cons in that people… Read more »

Taxes won't fix it
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Taxes won't fix it

It is actually a 25% increase in the meals tax (from 6% to 7.5%). It is a 1.5 percentage point increase. Sorry to nitpick, but that’s a pet peeve of mine and it is an important distinction.

As for opposition, once a tax is in place it is almost never repealed, even when “temporary”. The govt can’t live within its means, so the answer is to always just increase taxes, or implement new ones. And as noted, RPS has a whole host of issues to fix, most of which can’t be fixed with money.

Church Hill People's News
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Completely agree. At the very least that should’ve been the starting point.

mary
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mary

Part of Richmond’s administration continues to pit one group against another…and then call out to have one of the groups pay for that devisiveness. Sure, our kids are important. But our taxpayers are important. And our businesses are important. In the last several years taxpayers have shelled out millions of dollars to build new schools, schools hyped as fixes…like, hey! let’s show our students that we’re willing to pay millions of dollars for them…let’s give them slick newness…let’s pay for a more up-to-date environment…. That’ll make ‘em learn! There’s nothing to date that indicates the taxpayer is getting its worth… Read more »

Kate Miceli
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Thanks for sharing!

Sean Stilwell
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Sean Stilwell

“Nothing is so permanent as a temporary government program.” – Milton Friedman

SA Chaplin
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SA Chaplin

I hear you Neighbor, Taxes Won’t Fix It, Mary, etc.

I, myself, will support more money for our public schools under one condition: The school system must forgo improvements to the physical buildings (kids can learn in a barn, if they truly want to learn) and instead require that all new teachers have AT LEAST a masters degree, and be the best qualified at their profession. I will support a new tax to pay more money to this better cadre of teachers. It is the only hope we have to improve our schools.

Bill
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Bill

9 Mary
Amen

The U.....nion Hill
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The U.....nion Hill

Next up is the soda tax. Let’s see what bleeding heart cause the Dems will use to justify this.

ChimboPark
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ChimboPark

#12 – Why set the standards higher when we can’t even get teachers of any caliber to come?
Freakonomics did a great podcast on Teachers in America and our teachers vs other countries. THe short is that because education isn’t as valued or paid as well compared to other professions in the US, our best and brightest don’t go into teaching.

Also great article, Jacob, this is a very impressive overview.

Chris
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Chris

Fool me once, shame on you. Fool me twice…….

WHEN WILL WE STOP ELECTING THESE PEOPLE INTO OFFICE?

Dave Seibert
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Dave Seibert

This is a very difficult issue. On the one hand schools are super important and worth spending money on. On the other hand the City has such a bad track record of managing money. For my family I think that there is a great chance we will end up at a private school. So I could feel a lot better about paying more taxes for schools if the City offered vouchers for those that chose not to utilize the public system. That way I would feel like everyone needing education in the City was getting something out of the increase.… Read more »

Casey
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Casey

#12 The Virginia Board of Education already has requirements in place to be licensed in the state of Virginia, I have heard educators that have fallen through the cracks, however let’s be honest to put yourself through student debt with a average starting salary in the 30k area isn’t appleaing to much…the foundation of our school system starts with our educators, that I can agree, but there needs to be an honest compensation to entice up and coming educators to the Richmond school system.

Bill
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Bill

It is not a difficult issue. Newbil refused to support the referendum to fix all schools without new tax. Referendum passed with 84% of the vote. Now newbil will vote for a new tax that provides chump change and will not fix the problem. Tune in Monday nite and watch the mayor and city council say piss off to the 84% voters

mary
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mary

According to a local media source, our city council is poised to bite the hand that feeds it and approve the mayor’s call for a meal tax increase (meal tax, real estate tax, property tax, utility tax, storm water tax, cigarette tax, gas tax, tax, tax, tax, and on and on and on; and his response to a sane voice on council calling for a “sunset clause” on his proposed tax hike is that such a clause is “fiscally imprudent.” What does this person – who lied to the police to protect his friends midway through his political career (he’s… Read more »

MJR
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MJR

@Dave – vouchers? So essentially you want a rebate on your taxes because you want to send your kids to private school? Hell no. My husband and I will never have kids. We aren’t using that fact as any kind of justification to say we deserve lower taxes or a rebate/etc like you. We understand that public schools are a public good. And we need an educated society to thrive as a country. It is reasonable to expect to contribute to public schools in your local community regardless of whether you intend to a child to one. Yet you apparently… Read more »

lanny
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lanny

Virginia economics professor Bryan Caplan of George Mason University discusses his new book “The Case Against Education” in twenty-one well-worth-watching minutes.

It is not so much anti-education as it is anti-wasted-money-for-the-way-education-is-currently-done:

https://www.youtube.com/watch?v=1hZylJp-pHo

Jacob
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Jacob

@20 Mary the only thing I will say, and this is neither in support of the Mayor or against, BUT there is no leader that knows everything. Even managers and CEOs, no matter how smart, know everything required to run a business. The talent to leading is being smart enough to surround yourself with brilliant people that can fill in for your weaknesses and lack of knowledge. That’s why they have a cabinet, and experts, and staff. The hope, when supporting someone like Mayor Stoney or even the President of the United States, is that they’re surrounding themselves with smart… Read more »

WarGib
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WarGib

@22- Have you read the actual book? Sounds interesting.

trackback

[…] read numerous articles and comments online over the last few weeks about this tax.  We’ve heard your opinions. Now […]

Nancy Kellum
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The Democrates that you have put in charge of the state have destroyed the city if Richmond!! Wake up people , it’s worse that Chicago

Church Hill People's News
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No Nancy. It’s not. As someone who has spent a little bit of time in Southside Chicago it’s not even close.

Sean Stilwell
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Sean Stilwell

Oh sweet Nancy, take a deep breath….

ML
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ML

How does a less crowded school make the education better?

How does a child benefit from a less-crowded school when he/she has to go home to an apartment with NO HEAT?

In this order:

Remove the “authority” from the RRHA
Fix the Facility issues at the Courts
Deconcentrate poverty
Fix the Education Quality Issues
Build new schools- the RIGHT WAY from the ground up

Politicians too concerned with their voting record as it relates to their political career.

I don’t see how Stoney and Newbille can sleep at night knowing people they represent live so poorly.

Dubois2
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Dubois2

Public education in richmond is not good. Kids are not learning as we would like them to. Anyone disagree so far?

As far as I know there is NO PLAN TO CHANGE THAT. Meaning there are no actual plans to change what we are doing. Anybody know different?
Until there are plans, I’m not interested in pumping money into the schools. Spending money around a subject is Not the same as caring, and certainly not the same as making changes.

I’m deeply disappointed by mayor Stoney.

lanny
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lanny

#24 – I have not. I will wait til I can get it second hand; but if you’ve watched the interview with the author linked above and found it the least bit interesting, the brief discussion linked below (albeit between 2 Canadians in 2016) is applicable to the ills of public education in Richmond and throughout the USA:

https://www.youtube.com/watch?v=vSbEyBSO4qI

mary
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mary

#29 – Right on!

I spoke with a doctor in the country second only to Haiti in this hemisphere as far as poverty is concerned, discussing with him schooling opportunities in his country for a young student hoping to become a doctor.

He said “It’s not the school. It’s the student.”

Teresa Nieding Carrel
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The unique restaurants in Richmond are what set us apart and help make it a nice place to live. A lot of the restaurants are small and already have challenges such as surviving construction on broad and in the bottom and rising costs of restaurant workers (currently a shortage). I do believe a higher than an already high tax will make people think twice before coming from the counties and even going out to eat at all. And that’s gonna hurt the restaurants and the taxes that currently are generated by them. I do think raising this tax was an… Read more »

Dave Seibert
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Dave Seibert

@mjr Hey thanks for your thoughts. I’m not really sure both of our perspectives on how the voucher system works are aligned. Honestly we have never had it here in RVA (to my knowledge) so I have never seen it in action. So maybe I am the one that “doesn’t get it.” I too feel great about contributing as a member of society to education, social security, road improvements etc. My understanding is that the voucher system can in time open up doors for everyone to chose a school for their child. Initially we only have the privates schools in… Read more »

bill
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bill

there was a temporary meal tax added to pay for the preforming arts center a number of years ago. now that the center is built, why not redirect that temporary tax to schools?