The town of The Plains is pursuing a tax on food prepared by small businesses that serve such food and drink within its limits. The town is one of a handful of jurisdictions in Fauquier County permitted by state code to implement such a tax on its citizens and visitors.
Generally known as a “meals tax,” city and town governments typically argue that these type of transactional taxes help to offset or minimize the real estate and personal property tax burdens of its residents. Because the monies collected are passed through directly to the local government entity, the towns typically use them to fund any number of initiatives they deem appropriate, including capital expenditures, increased services, debt reduction, salary increases, etc.
Since its incorporation in 1910, The Plains has generally operated very efficiently without a tax on food. Tax levels have traditionally been low compared to other jurisdictions. Services, for the most part, have been provided to its citizens effectively, and the town has had a budget surplus/reserve for the better part of its existence. In fact, with the exception of a couple of years in the early 1990s, I cannot recall any time where the town went into deficit spending or otherwise had to substantially dip into reserves to maintain services.
Against this backdrop, the implementation of a meals tax deserves further scrutiny.
First, the current town budget is around $103,000. If I do the napkin math, at a 4-percent burden on receipts, the proposed meals tax would conservatively generate $62,000 in revenue. This will represent over 60 percent of the entire current government budget. Would it be fair or even equitable for a government to suddenly impose such a burden on a small targeted business group?
Second, one of the usual arguments by government when implementing a meals tax is that “out of towners” pay them. While many of those that patronize the food establishments in The Plains are from Middleburg, Gainesville, Washington, D.C., and beyond, a larger number of town residents and those from surrounding areas in Fauquier County frequent The Rail Stop, Girasole, Crest Hill Antiques and Tea Room, The Front Porch and Happy Creek because they appreciate good food, community fellowship and the friendly atmosphere of each. Any reduction in real estate or property taxes would be offset by transactional fees on coffee, takeout, teas, pastries, sandwiches, lunch and dinner items at those establishments. If combined with the existing sales tax, one would pay over 10 percent of their tab to a government entity every time they buy food and drink items in the town.
Third, a tax for the sake of a “tax” is counterproductive. Governments don’t create jobs; people and small businesses do. The restaurants and those that serve food in The Plains employ hard-working service workers, a number of whom reside within the town limits or nearby. If you raise the price of food and drink, then patrons don’t spend as much. If patrons don’t spend as much, then service workers who rely on tips will suffer. Further, if the price of food increases enough, customers will look elsewhere, and the potential for layoffs occur as revenues decrease.
Lastly, the General Assembly’s original intent of the meals tax was to specifically help those businesses that collected the tax grow and expand through capital and operational expenditures earmarked for such. Over the years, governments have erred and used the proceeds for general purposes which did not specifically benefit those for which the code was intended. Which begs the questions that, if implemented, where specifically will the funds be allocated in The Plains? Jurisdictions have the obligation to earmark these types of revenues for tourism, business development or improvements to the town to facilitate enhanced conditions for its citizens and businesses. As such, allocating any of this “windfall” tax money, if implemented, should be appropriated to uses that protect the taxpayer, encourage business investment and perpetuate the unique character of the special Town of The Plains.
This opinion piece was originally published on the Fauquier Now website here.