Facing restaurant industry pushback, the city council has verbally agreed to increase 色多多鈥檚 meals tax by one percentage point starting July 1.
Texas Tavern owner Matthew Bullington appealed once again to the city council during its meeting Monday, at the outset of National Small Business Week. Bullington is leading a group of restaurant owners in opposition to the proposed meals tax increase.
鈥淪ince it鈥檚 small business week, I will respectfully ask city council to find another way and don鈥檛 increase the meals tax,鈥 Bullington said. 鈥淒on鈥檛 place this burden on these small, independent businesses that give 色多多 such vibrancy and character.鈥
The one-point increase still requires a formal vote of approval. The city council is holding a May 12 special meeting to adopt its proposed $400 million budget, including the tax increase.
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Currently, a 5.5% tax is collected from customers by restaurants, and the city takes that revenue. A meals tax increase to 6.5% is half a point less than city staff initially recommended, but still more than restaurant owners want to see.
The extra percentage point would equal about $4 million in revenue for city government, split between operating budget and capital maintenance, staff said. New City Manager Valmarie Turner has emphasized catching up on stagnant staff pay and deferred capital maintenance.
Turner
鈥淲e planned five to six years in order to meet the needs of our deferred maintenance,鈥 Turner said. 鈥淎bout $25 million is what we鈥檙e estimating.鈥
Mayor Joe Cobb said he wants the city to implement a discount for restaurant owners who pay their meals tax in a timely manner.
鈥淚鈥檓 personally probably leaning toward the 1%, with a suggested deduction, which I acknowledge reduces the revenue,鈥 Cobb said. 鈥淚t would function, I believe, as an incentive, but also as a nod to our restaurants and the hard work that they do.鈥
Cobb
The meals tax increase plus a discount would still generate a net positive, though less, for city revenue. Staff said a 1.5% meals tax discount, if implemented, would reduce city revenue by about $333,000, and would be calculated for qualified restaurants before they pay.
鈥淢any of them already pay on time, so this would be a way to acknowledge that,鈥 Cobb said. 鈥淪econdly, my hope would be that it could reduce or eliminate the issues that we鈥檝e seen recently related to restaurants that haven鈥檛 been able to pay, or have been in arrears on their taxes.鈥
Most city council members, including Peter Volosin and Evelyn Powers, said they wanted to sunset or at least reassess the tax increase in a few years. Powers said she is glad to not be raising the property tax rate.
鈥淚 could support the 1% with a sunset clause, or to at least let people know that we could look at it,鈥 Powers said. 鈥淚 don鈥檛 think any of us really like this position that we have to do, but I could support that, and I do like the idea of doing a discount.鈥
Councilman Phazhon Nash said a sunset could set the city council up to mislead people.
Nash
鈥淚鈥檓 not opposed to 1.5%,鈥 Nash said. 鈥淲e should be looking at this kind of stuff every year. I鈥檓 not in support of a sunset.鈥
Councilman Nick Hagen, the council鈥檚 only Republican, said he is not a fan of raising the meals tax.
Hagen
鈥淐onsumption-based taxes by definition are regressive,鈥 Hagen said. 鈥淭hey disproportionately affect lower-income individuals.鈥
Vice Mayor Terry McGuire said he鈥檚 worked in restaurants, and these are uncertain economic times, so he鈥檚 not happy about raising taxes.
鈥淎 modest increase of 1% I could support,鈥 McGuire said. 鈥淚 don鈥檛 think this alone would have a huge impact on most people鈥檚 decision to go out to eat.鈥
