Taxing the hand that feeds state economy

Restaurant Row is under attack by seemingly the last group of people they would suspect. In its all-consuming zeal for revenue, the governor and General Assembly have in their sights one of the few flourishing industries in the state.
By including in the proposed budget for the coming fiscal year an increase in the state meals tax that would add a total of 10 percent to the cost of a meal, the governor and legislature are putting the state’s vibrant restaurant industry in jeopardy.
Restaurant owners have mobilized behind the Rhode Island Hospitality Association and have demanded that this proposed tax be removed from the state budget, as well they should.
Right now the sales tax is 7 percent and the meals tax is 1 percent. Chafee’s budget would take the meals tax to 3 percent, which would make the total combined tax 10 percent. The tax is charged at restaurants, takeout counters, for prepared foods at supermarkets and for catered dinners at weddings and functions – ironically enough including political dinners.
The hospitality association and its board of directors are on record in opposition to the proposal. The association has stated that the tax increase “will place an undue burden on local businesses, and put the state at a competitive disadvantage.”
In media accounts of the opposition by the restaurant community in rallies and protest marches, including a “tea party” that attracted worldwide media attention, the focus has been on the impact to the industry.
There is another aspect to this proposed tax that has not been reported on.
Forty-nine cents of every dollar that you and I spend on food is spent on prepared meals, cooked for us at a restaurant or takeout counter. According to the National Restaurant Association, this figure has doubled over the past 50 years. Due to the changing of the culture over the years, particularly the necessity of two-income families and the resulting demand on our time, there is far less home cooking being done. Families are being fed today by restaurants, including prepared foods from supermarkets and delis. Those prepared foods would be taxed at the 10 percent rate if this new levy is put into effect, whether they are purchased from the takeout counter at the neighborhood restaurant or the prepared-foods section of the supermarket.
This new tax would be nothing less than a tax on food.
If the governor or the legislature were ever to propose a food tax, it would never see the light of day. It would most likely never be proposed, because what elected official would run the risk of having his or her name attached to such an onerous levy? But that is just what this new tax is.
The governor through his administrative bureaucrats has attempted to minimize the opposition by putting forth the notion that the tax increase would amount to, say, no more than 10 cents on the cost of a pizza. The reality is, however, in many households in the state, pizza is what is for dinner several nights each week. And one pizza is not enough.
To feed a hungry family, two or three pies is the usual order. That 10 cents adds up. At the end of a year, the family has added $50 to its food bill. If pizza is not to your liking, how about fish and chips, Chinese, Mexican or Indian? The price goes up as does the new tax. Fifty dollars becomes hundreds.
And this is not for a night’s entertainment, another canard put forth by our elected lawmakers. This is taxing no less than sustenance. Perhaps there is a discussion to be had about whether this is nutritionally sound. That discussion will have to wait for another day. This is what life is like in 2012 in Rhode Island. Industry leaders and restaurateurs such as Robert Bacon, president of Gregg’s Restaurants, testified against the increase before the House Finance Committee. Bacon stated that it will cost his company $24,000 in each of his restaurants per year if such a tax is implemented. That equals a line cook’s salary. The trade-off would most certainly result in layoffs industry-wide in the state.
Currently, the restaurant industry in Rhode Island accounts for an estimated 52,000 jobs.
Brad Cheravaty, co-owner of The Fifth Element in Newport, is the personification of the Rhode Island restaurateur. He is in his restaurant every day taking reservations and paying bills. On a recent Wednesday afternoon he was rearranging tables and chairs for a large party to be held that night.
He also tends bar at his Broadway bistro. His partner in the business stayed at the restaurant, while Cheravaty joined his colleagues on Smith Hill. “Too many restaurant owners in the state can’t afford to go up to the Statehouse,” he said. “They have to stay and run their business.”
In recapping his testimony, he said, “This is being called a tourist tax.” But as he reminded us, “The tourists are only here two months out of the year. This is a tax on Rhode Islanders who can’t afford to pay it. This tax will bankrupt my business.”
The budget, including the proposed increase in the meals tax, will be voted on by the General Assembly in May. Information to contact legislators and the governor can be found at the hospitality association’s website, rihospitality.org. •


Bruce Newbury’s food and wine talk radio show is heard Saturdays and Sundays locally on WPRV-AM 790, on radio throughout New England and on the Stitcher mobile application. He can be reached at bruce@brucenewbury.com.

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