Takeout equity: Meals tax impact on low-income diners

Mel Walker says a meals tax increase won’t affect his business at Mel’s Cafe, but it will hurt poor people.
Eze Amos Mel Walker says a meals tax increase won’t affect his business at Mel’s Cafe, but it will hurt poor people. Eze Amos

Affordable housing is a priority for Charlottesville, and to pay for that in its $188 million budget, the city proposes raising the meals tax, an idea restaurant owners traditionally hate.

The 1 percent increase on the current 5 percent meals tax adds 10 cents to a $10 meal and would raise $2.4 million, according to the city. The proposed budget also ups the lodging tax to 8 percent.

In a March 12 Facebook post, Mayor Nikuyah Walker suggests that those who don’t support the increase don’t support equity. “The restaurant and hotel industry are selfishly making arguments about their failed revenue projection,” she writes. “A few small business owners who have not turned their hobbies into successful enterprises are blaming our potential tax increase as the foundation for their demise.

“A few restaurant owners want you to believe that they’re catering to low- to middle-income families and that the extra 10, 20, or 50 cents will prevent you from eating out.”

But some owners who actually do cater to low-income customers also see a problem with the tax.

Mel Walker owns Mel’s Cafe, which is known for its fried chicken, as well as its affordable home-style food, where the most expensive thing on his menu—the 12-piece chicken wing ding— is under $9.

“I don’t think it will affect me that much,” he says of the proposed increase. “It’ll hurt the poor people. It’s local people who eat here.”

He already has to explain to customers why their bill is more expensive than his posted prices when he rings them up and adds the 5 percent meals tax and 5 percent sales tax to the bill.

“I don’t think it’s necessary to raise it,” he says.

Mike Brown, also famous for his fried chicken at Brown’s, says increasing the tax is a good idea— “if you want to punish your people.” He says his customers are mostly locals from all walks of life.

Increasing the tax “affects locals more than those who come in once in a blue moon,” he says.

Brown also is not happy about the city’s 55-cent cigarette tax when people “can ride down the road and buy cigarettes in the county.”

He estimates he collects between $1,700 and $2,000 a month in meals taxes already. “I don’t pay it,” he says. “The customer does.” And a lot of his customers are “people struggling paycheck to paycheck.”

The city last raised the meals tax in 2015, and C-VILLE reported then that some argue it’s not a regressive tax because eating out is, as one councilor said, discretionary and a “luxury.”

Rapture owner Mike Rodi says, “No one who studies economics says that a sales tax isn’t regressive.”

Even an extra dime “is a more significant chunk out of someone’s income who makes $20,000 than it is for someone who makes $250,000, says Rodi. Housing, food, and clothing all “disproportionately impact people with lower incomes.”

His concern is that when there’s a budget shortfall, the “autopilot response” is, “Let’s just raise the meals tax.”

Says Rodi, “I just want to make sure other options are considered before raising taxes.” He notes the commissioner of the revenue office says tax collection is outpacing expectations and there could be surpluses. He also says the city’s reserve has been untouched for years and could be tapped into. “Or how about a smaller increase on meals, housing and lodging so it’s not always the meals tax?”

Like Mel Walker and Mike Brown, Rodi says, “There’s a misperception [the meals tax] is paid for by visitors and rich people. Look at the lines at Bodo’s and McDonald’s.”

Rodi acknowledges that even with an increase, “I will be in a better position than the people we’re trying to help. I recognize my privilege.” At the same time, “this isn’t a yacht tax” that affects only luxuries afforded by the rich.

Mayor Walker took aim in her Facebook post at restaurant owners. “Low- to middle-income families would like to not have to take out a small loan to take their families out to eat at your establishment,” she says. “Don’t use low- to middle-income people as scapegoats. I would like for you to figure out a way to pay your staff a living wage and allow them to accept 100 percent of their tips and give them quarterly bonuses.”

“You can’t have it both ways,” says Rodi. “I can’t pay someone $25 an hour and buy local, sustainable food and charge you Burger King prices.”

Working in a restaurant is one of the last industries where upward mobility can happen, he says.

Nancy Carpenter, homeless prevention coordinator at the Haven, doesn’t think an extra 10 cents is going to stop someone who’s homeless from buying a cheeseburger. She says they’re also eating at soup kitchens and having breakfast at the Haven.

“The lack of affordable housing options—that’s more important than whether my McDonald’s is going to cost $1.10 or $1.25,” she says. “I don’t foresee this as onerous. It’s onerous when you don’t have a key to a place to live.”

Currently, Walker and Wes Bellamy support the meals tax increase, and Kathy Galvin suggests a half-cent increase because the $35 million capital improvement expenditure is a one-time expense.

City Council has a public hearing on the budget tonight at 6:30, and work sessions scheduled for March 19 and tentatively for March 27.

 

 

 

 

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