Meals Tax: Myths and Misconceptions

Meals Tax: Myths and Misconceptions


As the Nov. 8 General election draws near, we would like to take the opportunity to set the record straight and do some myth busting regarding the meals tax. If adopted, the meals tax would allow the Board of Supervisors to impose a tax of up to 4 percent on prepared meals purchased in grocery and convenience stores and restaurant bills. The estimated revenue of $99 million would allocate 70 percent to schools to make teacher salaries more competitive and decrease class sizes and 30 percent for general county services or capital improvements such as public safety, mental health services, libraries, and parks, as well as providing for property tax relief.

Ultimately, the voters will decide whether the county has a meals tax and if approved by voters, 28 percent would come from tourists, commuters and travelers that do not live in Fairfax County. If approved a meals tax would generate roughly the same revenue as a 4 cent increase on property taxes. If the proposed meals tax referendum passes, it would become effective July 1, 2017.

Currently, about 65 percent of Fairfax County’s General Fund budget relies upon real estate taxes. Two years ago, the bond rating agencies advised the Board of Supervisors that the county needs to diversify revenue and increase reserves to maintain our credit ratings. These credit ratings are important because they impact how much the county pays to borrow money to invest in infrastructure like police and fire houses, parks, recreation centers, libraries roads, and schools. A meals tax would diversity the county’s tax revenue base.

Myths have evolved which need to be corrected. Fairfax is not unique in proposing a meals tax. Over 200 jurisdictions in the Commonwealth of Virginia currently have a tax on prepared meals, including most of those surrounding Fairfax County.

Myth 1:

Some have said that we do not have a revenue problem in Fairfax County Public Schools (FCPS), we have a spending problem. That concept has been repeatedly discredited.

  • According to the Center for Public Education, the national average for funding is 44.8 percent by the Local Government, 45.1 percent by the state and 10.1 percent by the federal government. Here in Fairfax, because of chronic underfunding by the state which funds 22.9 percent and the federal government which funds 1.6 percent, the local property owner has picked up the 75 percent shortfall.
  • An independent analysis of the school systems operations conducted in 2013 found that FCPS was one of the most efficient school systems in the country. Over 92 percent of FCPS expenditures are school based, primarily on teacher salaries.
  • Unfortunately because of our continued below market average teacher salaries, we continue to face a shortage of teachers. Our teachers can move to a neighboring jurisdiction and make $10,000 to $20,000 a year more. A recent study by the Center for Regional Analysis at George Mason University found that every dollar spent by FCPS generates $1.20 in economic activity in Fairfax County.

Myth 2:

A meals tax would have a negative impact on economic growth in the restaurant industry.

  • To the contrary, a meals tax has allowed local governments in a number of local jurisdictions to keep the property taxes lower and invest in much needed infrastructure. Good examples of this are Alexandria (1.07/$100), Arlington (.99/$100) and Washington D.C. which has a .85 per $100 rate.
  • The National Restaurant Association states on its web site that the highest per capita spending in restaurants across the United States is in Washington, D.C. where the industry generates $3.6 bn/year. Coincidentally, D.C. has the highest meals tax in the region (10%).
  • In August, Bon Appetit named Washington, D.C. the restaurant city of the year. This month, 12 D.C. restaurants earned the coveted Michelin stars in its first edition of the legendary Michelin Guides to world-class restaurants. This seems to debunk the concept that the meals tax will lead to a loss of jobs and closure of restaurants.

Myth 3:

The meals tax is not fair because it would single out a single industry when other industries are not singled out.

  • There are multiple taxes which are applied to individual industries. For example, we have a cigarette tax (1.5 percent per cigarette) which has increased six fold since 1970, we have a tax on gasoline, vending machine products (7 percent), motor vehicle rentals (10 percent), alcohol (11.5 percent), occupancy taxes (6 percent) and even media taxes (10 percent) for films viewed on line in hotels or motels.

Myth 4:

The tax is regressive and impacts lower income families the most.

  • The National Restaurant Association states that although the average family spends $1071/year, over half of all restaurants expenditures are consumed by families earning in excess of $70,000.

Last year, the county estimated that the 4 cent increase increased property taxes an average of $300. For Mount Vernon residents, a 4 percent tax on meals would mean additional funding and resources for our neediest schools, lower classroom sizes, quality services, safe communities, compassionate human services, increased teacher retention and top-notch schools.

Fairfax is a diverse and thriving county. The county has the 10th largest school division in the U.S. — with nearly 93 percent of students graduating on-time and revitalization efforts underway — revenues from a meals tax would allow the county Board of Supervisors to continue to invest and lead to increased business growth and jobs.

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