Meals tax more palatable than local income tax.
The April 29 Register-Guard carried a county-funded ad for Measures 20-129 and 20-130, the revival of the failed-in-November local income tax proposal. On the front page was an article with the usual gloom-and-doom speculations about what would happen if these measures again fail on the May 15 ballot.
It's clear that Lane County needs a secure, long-term source of funding for public safety services that is not dependent on doubtful federal timber payments. A local income tax is not the only option. It's time to revisit the idea of a prepared foods tax.
We proposed such a tax in a Register-Guard guest viewpoint last July. We cannot understand why the county commissioners live in terror of the Oregon Restaurant Association when they admitted to us that a poll taken before the income tax proposal came out in 2006 showed that a majority would favor a restaurant sales tax. Most people would be willing to pay an extra $2.50 to $3 on a $50 meal to support public safety.
A prepared food sales tax makes sense. It would raise the revenue the county needs for public safety, and it is far less expensive and burdensome to administer than an income tax.
We presented this idea to the commissioners in December and January and got a flicker of interest from Commissioners Faye Stewart and Bill Fleenor. Peter Sorenson later requested more information, which we supplied.
The public rejected the proposed income tax in November for good reasons. Local income taxes are rarely used in the United States. Only some 53 out of 3,141 counties impose local income taxes, usually where an inner city must serve nonresident suburban wage earners.
A local income tax on individuals and businesses places a selective burden on a segment of the citizenry already hit hard by federal and state income taxes. Estimates of potential revenues for a local income tax are vague. There is no current information on the actual Lane County sales that businesses would have to report. There is no estimate of the income of out-of-county employees or businesses that would be subject to the tax. It is unclear how collection could be enforced.
A sales tax on prepared foods sold at restaurants and supermarket deli counters is a viable alternative. Such taxes are the norm in the United States, either as a specific tax or as part of a general sales tax. Lane County residents pay a tax on prepared food when we visit neighboring states. All our out-of-state visitors pay a tax on prepared food in their home states.
Such a tax is legal in Oregon. A food and beverage tax has been in effect in the city of Ashland since 1994. Last year, at a 5 percent tax rate, 134 food and beverage establishments yielded $1.85 million in tax revenue to the city.
A tax rate of 6 percent in Lane County would raise upwards of $25 million in net revenue for public safety, based on data from the Lane County Environmental Health Department. The data show that Lane County licensed 924 full-service restaurants and 144 mobile units in 2006.
Extrapolating from the last Oregon Economic Census data in 2002, the 924 restaurants (not including all of the other providers of prepared foods) would have revenue of approximately $519 million. A significant portion, as much as one-third, of the tax would be paid by nonresidents - tourists - who are definitely being served by Lane County public safety while they are here.
The administrative costs would be far less, with only about 1,500 taxpayers reporting. The infrastructure to collect this tax is already in place in the cash registers and accounting software used by food service establishments.
By contrast, the local income tax would have upwards of 150,000 filers. Having the city of Portland collect the tax, as the commissioners have proposed, would require as much as $2 million per year in outside administrative costs.
Although the business impact on Lane County restaurants would be minor, a portion of the revenue - we suggest 5 percent - could be used to promote the restaurant and tourism industry and to provide meals and nutrition services for low-income families and senior citizens. The portion directed to tourism would further mitigate the impact on restaurants. The portion for low-income families and senior citizens would mitigate the impact on a segment of the population that relies more heavily on prepared foods.
Please show your support for the idea of a prepared foods tax by writing or e-mailing the commissioners. Their addresses can be found at www.co.lane.or.us.
Karen and Thomas Reid of Springfield worked for 30 years providing fiscal and environmental analysis to state and local governments in California.
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|Publication:||The Register-Guard (Eugene, OR)|
|Date:||May 4, 2007|
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