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.
- Some people oppose taxes on principle.
- Restaurant owners say the tax will hurt businesses and keep them from being competitive (http://www.stopthefoodtax.com/).
- 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).
- 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.
- 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/.
- 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.
- 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.
- It’s better than a general sales tax increase or property tax increase because:
- It, in theory, affects the rich more than the poor (see #2 above)
- 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.
- 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 Contact Info or City Council District Map
Opposing Petition: http://www.stopthefoodtax.com/
Supporting Petition: http://rvakidscantwait.com
50 comments
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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?
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?
Thank you for your research and concise analysis of this issue! You and CHPN are an asset to our community.
Super clear and informative, Jacob – thanks!
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.
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 ‘see’ the Richmond government as inefficient, it is not just ‘seeing’ but a statement of fact. The RTD did an editorial on the 23rd of January that outlined these inefficiencies where the city of Richmond somehow spends nearly 3X per capita than comparable Virginia cities on ‘General Government Administration’. Basically, Richmond spends around $350 per capita on government administration, which comes out to nearly $80 million based off of Richmond’s 220,000 residents. Other comparable cities spend $120-$170 per capita on the same services. A 12.5% reduction in this category alone would generate $10 million, and the city would still be spending 2.6X comparable cities but there is the $10 million in matching funds right there. The RTD cited atleast 2 other areas where the city of Richmond vastly outspends other cities in Virginia.
The city has the money, they just lack either the competence, will, or both to find it.
It should also be noted the audacity some of the council members have in supporting this tax increase and citing the years of neglect that has led to the current crisis, when they are the very people who have been responsible for the neglect.
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.
Completely agree. At the very least that should’ve been the starting point.
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 for the money it’s already shelled out for new schools: fights, low test scores, lack of accreditation, frightened teachers; and now the school system isn’t even going to comment on school fight videos: “RPS says it will not comment on school fight videos anymore, because the district says it doesn’t want to promote violence.” (NBC12, Jan 25, 2018) Like, let’s tell the media not to report on bad traffic accidents…it might promote more of them.
And so the city’s mayor is claiming that if taxpayers fund just a few more new schools, then every student will be able to pass tests. How’s that worked so far?
An October, 2017 “poll indicated favorable support for increasing taxes…for the school system.” In November, 2017, during local elections “a solid majority of city residents voted” to require the mayor to come up with a plan for the school system without raising taxes. A more recent poll followed the mayor’s announced intention to stick it to taxpayers that resulted in another solid majority – that says NO.
So the mayor recently showed up on a sidewalk in Shockoe with his little sound system and a coterie of RPS graduates claiming, against all natural law, that “…the future is now” telling us, again, that one group in the city is more important than all others…and it’s time for taxpayers to shell out.
It’s interesting to note that Richmond has a mayor who not only can’t tell the difference between the present and the future but who, having accepted the challenge of coming up with a plan for the school system without raising taxes – failed the challenge.
One of the mayor’s sidewalk attendants said ““it is time to rise up.” So, the solution is to rise up by putting an additional burden on the portion of our business community that’s helped Richmond win national recognition, our restaurants? That’s not common sense. That isn’t any sense at all.
Thanks for sharing!
“Nothing is so permanent as a temporary government program.” – Milton Friedman
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.
9 Mary
Amen
Next up is the soda tax. Let’s see what bleeding heart cause the Dems will use to justify this.
#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.
Fool me once, shame on you. Fool me twice…….
WHEN WILL WE STOP ELECTING THESE PEOPLE INTO OFFICE?
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.
That said, let’s talk about Real Estate, because that is what I know about. The City has been able to raise assessments for real estate about 20 percent over the last couple years. So I am curious where those funds are going? That twenty percent represents millions of dollars. Additionally the City just made about 3 million auctioning off blighted tax delinquent real estate at their last tax sale. That was for the sale of about 50 properties. The City has THOUSANDS of these properties that they could auction off. THOUSANDS!!! The cost to process one of these blighted tax foreclosures is maybe $1000 and the return is probably $30,000 immediate return AND the City no longer has to pay to cut the grass at this property AND the City now has an owner that will pay the taxes. A back of the napkin estimate tells me that for $400,000 in City investment to process these properties they could recoup over $120,000,000! And see a large annual increase in revenues there after.
I am just one man but to me it makes sense for the City to not punish those business that are bringing revenues into the City and helping put Richmond on the map when they could collect the money already owed to them from the folks who are holding onto vacant and dilapidated structures that in fact are damaging and blighting our City.
#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.
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
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 been a politician since elementary school when he was elected student body president)…but gave up both the truth and his friends when the FBI got into the case- know about anything fiscal?
Has he studied finance? Has he studied economics? Has he run a business? No and no and no.
But he makes a claim about fiscal imprudence and expects people to believe he knows what he’s talking about. And amazingly enough, frighteningly enough, a lot of people WILL believe he knows what he’s talking about.
Why is that?
@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 want to instead bleed the RPS coffers dry because of your privilege and prerogative to send your child to private schools. By all means send your kids where you want to – but on your own dime…
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
@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 people that educate them about the things they don’t know and that they’re smart enough to listen.
@22- Have you read the actual book? Sounds interesting.
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
No Nancy. It’s not. As someone who has spent a little bit of time in Southside Chicago it’s not even close.
Oh sweet Nancy, take a deep breath….
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.
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.
#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
#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.”
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 easy grab and I’d like to see their financial folks work a little harder.
@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 place that we currently have. So very likely a students family will need additional money with the voucher to attend a school. BUT with the voucher a huge new batch of families/students will have options. And out of that supply the demand for additional private schools will exist and the many great people who wish to serve our youth may take this opportunity to create new small schools at little to no cost to the student/family.
Not every private school needs to be expensive. In fact there are excellent private schools in the east end who serve extremely at risk youth that are having amazing success while the public schools are failing. These schools are funded largely by charitable donations. So I think it would be great if the money we spent to schools that are failing these youth were able to be spent at schools that are actually having great success. The voucher may open up doors to expand these programs.
All that said the point of my post was simply to say that it would be cool to have the options as citizens to apply our tax dollars to education that exists and that is proving more effective than our public system. (For those who are rich, poor or anywhere in between)
All that said, I am no expert on education systems. These are just my thoughts from the little that I know.
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?
I’d like to see correlating data on the proportion of meals tax to median income in Richmond versus other cities of same size to see how we rank. Seems like our taxes are high, and our return on investment is low.