Restaurant owners oppose meals tax

Dining out could get more expensive if the current proposed city budget is accepted.

Tax rates — This graphic shows the highest meals tax rates among major metropolitan areas. All of the rates listed are state and local taxes combined. Lynchburg’s 2013 budget proposal would increase the tax to 12.5 percent. Of the 50 cities on the Tax Foundation’s list, all but 17 have meals tax rates below 9 percent, including New York City, Los Angeles, Houston, Philadelphia and Boston. The city with the lowest meals tax was Milwaukee with 5.65 percent. Source: Tax Foundation Graphic by Elliot Mosher

According to the 2013 Fiscal Year budget report released by City Council, the Eat for Education tax proposal is suggesting a one percent increase to raise current local taxes from 6.5 percent to 7.5 percent for all meals bought in the City of Lynchburg, raising the total from 11.5 to 12.5 percent. The reason for the tax increase, City Manager Kimball Payne said, is to produce a balanced budget without cutting services to the City of Lynchburg.

“In a nutshell, the city has been struggling for the last three years with the recession that we’ve gone through,” Payne said. “We’ve seen our costs for services go up considerably while our revenues have remained flat.”

The revenue from this particular tax is going into a fund to help pay for the rebuilding of Heritage High School, according to Payne.

A group of restaurant owners recently got together to try to protest the proposal. Bob Plunkett, the group’s spokesman and the director of operations for Shakers Restaurant and the Neighbors Place, said that he believes this tax increase to be unfair.

“Why make us the ones that would have to collect the most taxes? Why make us look like the bad guy,” he said.

Plunkett said that he also feels that the fund the money is going into does not benefit everyone.

“Typically when you build a high school or a school, the people that live in the community where that school is, they’re the ones who usually foot the bill for that,” Plunkett said. “Sure, we get a lot of people (in our restaurant) who eat there from the City of Lynchburg, but we have just as many eating there from the other counties. That doesn’t seem fair to me.”

According to the proposal, the meals tax is expected to generate $1.7 million. Plunkett said the city recently borrowed $25 million to build the school, and the $1.7 million is being used to pay off interest that the money accumulated.

The fact that tax on meals is already one of the highest in Virginia — Lynchburg currently has an 11.5 percent meals tax — is ruffling the feathers of many restaurant owners, Plunkett said. If the proposal is accepted, Lynchburg would tie with Covington for the second highest meals tax in Virginia and would fall slightly behind the Town of Orange, which charges eight percent before state tax is added.

“Eleven point five percent is already a little bit embarrassing to explain,” Plunkett said. “(My customers) look at us for the answer, because it’s on the bill.”

A recent survey by the Tax Foundation looked at 50 of the United State’s largest cities and their meals tax rates. Comparing Lynchburg’s proposed tax hike to some major U.S. cities, the city on the survey with the highest meals tax was Minneapolis at 10.775 percent.

“You might come from a major metropolitan area that has more major infrastructures and public services than we have here and the taxes there are lower,” Liberty University’s Vice President of Financial Research and Analysis Richard Martin said.

This tax, along with the other tax increases being proposed, is necessary to produce a balanced budget, according to Payne.

“We have to produce that balanced budget and we have to make those choices,” Payne said. “It’s a challenge. City Council is very diligent in doing their job.”

According to Payne, if the budget is rejected then the City Council will need to start considering which public services to reduce or even cut.

“Everything from closing fire stations, reducing public safety expenditures, libraries, museums, parks, programs, things like that, would have to be eliminated — some of those to produce a balanced budget,” Payne said.

While restaurant owners are not worried in a complete loss of revenue or that 12.5 cents on every dollar will completely stop a person from eating out, they are slightly worried that people may begin cutting back on the amount of times per week that they eat out, according to Plunkett.

“If you give anybody a reason not to spend in Lynchburg, this thing could pack a lot,” Plunkett said.

According to Martin, if the budget is accepted, then Liberty students’ Flames cash money would not be worth as much.

“If the meals tax goes up…, obviously a smaller portion there gets used for food and more on taxes,” Martin said.

The art of creating a balanced budget and making everyone in the city happy is nearly impossible, according to Payne.

“Some people use services, some people don’t use the same services. So the challenge for any local government is to try to figure all of that out,” Payne said.

A public hearing on the proposed tax increases will be held tonight, Tuesday, April 3, at 7 p.m. in the City Council Chamber. For more information, visit

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