Business Owners Outraged by Chafee Meals Tax
Thursday, March 08, 2012
The restaurant industry is continuing its efforts to prevent the General Assembly from supporting Governor Chafee’s proposal to increase the state’s food and beverage tax to ten percent, a plan the Governor says will help raise revenues to fully fund the education funding formula.
This week, business owners have come out in droves to testify in front of both the House and Senate finance committees, arguing that any increase in taxes will force them to raise prices, which could scare prices in a still-struggling economy.
“The Governor’s proposal to raise the meals tax to ten percent sends the message that Rhode Island is not a place to visit or do business,” said Dale Venturini, President and CEO of the RI Hospitality Association. “The hospitality industry is one of the few sectors to add jobs in recent quarters. If this tax increase is approved, that job growth will not only be stalled but it will likely be undone.”
GET THE LATEST BREAKING NEWS HERE -- SIGN UP FOR GOLOCAL FREE DAILY EBLASTVenturini said that in a short time, state restaurants have collected more than 5,000 signatures from guests who do not support the tax hike.
“That is a pretty resounding outcry of opposition,” she said. “Over the last two days our members have testified against this tax before both the House and Senate Finance Committees. While this proposed increase was not their idea, we are looking to the General Assembly to remove this harmful tax from the Budget. We're hopeful that our message ‘10% is 2 Much’ is heard.”
“It’s Terrible”
Chafee’s proposal includes $76 million dollars in new taxes, plus another $17 million in increased rates, which includes the meals tax. He says tax bump is all part of a plan to close a projected $120 million deficit for the 2013 fiscal year.
“I have continued to insist on an honest, fiscally responsible budget,” Chafee said in his State of the State address in January. “This budget proposes a clear way to pay for this substantial and necessary education funding and help for our local communities: it will be supported by a 2-percentage-point increase in the meal and beverage tax. I know that this will be controversial, but the money we raise will go to the most important investments we can make: educating our young people and helping the property taxpayer.”
But business owners say the plan will have a negative impact on the state.
Robert Burke, who owns Pot Au Feu downtown, said the tax increase would only make Rhode Island less competitive, particularly for the convention industry. He said other New England cities will have an easier time grabbing business away from Rhode Island if Chafee’s plan passes.
“It's terrible, it's unfair, it's inequitable,” Burke said. “You would think our politicians would get that those people need a night, but they just don't get it.”
State Senator Against Plan
Some members of the General Assembly have already said they cannot support the proposal. Last week, Senator James Sheehan said he is worried that the tax increase would cause trouble for local restaurants, which would see fewer numbers of out-of-state diners, who make up a large part of the clientele for many businesses. This is especially true for eateries located on the Massachusetts border, as the meal tax in Massachusetts is only 6.25 percent, he said.
“There comes a time where the effort to raise funds through higher taxes reaches a tipping point,” he said. “Raise taxes too high on a lunch at a local restaurant, and fewer people will eat lunch there, and fewer taxes will be collected, and more restaurants will suffer.”
Chafee's budget proposal will also increase taxes on taxis and limos, moving, storage, the tobacco industry, pet services, car washes, warehousing and freight services, and bed and breakfasts. It also outlines $45 million dollars in cuts, much of which would come from health and human services, and it includes plans to increase funding to struggling cities and towns.
But those in the hospitality industry say the meals tax could force some restaurants to shut their doors. Vic Pichette, a hospitality consultant, recently told GoLocalProv that it is already a difficult time for many businesses and the new tax might put some over the edge.
“It’s a very difficult market, Providence is not what it used to be,” he said. “You have to do everything right or you're not going to survive.”
