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Is a Meals Tax the Right Direction?

Is a Meals Tax the Right Direction?

Arthur Purves -- President, Fairfax County Taxpayers Alliance, 06/11/2014

"Would a meals tax fix everything? No, probably not, but it would certainly point us in that direction in a reasonably painless way." -- Hunter Mill Supervisor Cathy Hudgins, Hunter Mill Highlights, May 2014.

The following compares pros and cons regarding a meals tax.

Diversify the tax base: Taxpayers have to pay an additional tax.

Reduce pressure on real estate taxes: No. A meals tax will raise $90M. Annual funding of 4.5 percent raises -- Cost of Living Adjustments (COLA) plus step increases -- for 30,000 school and county employees, their zero-deductible in-network medical insurance, and pensions allowing retirement at age 55 with 75 percent of salary costs about $200M ($120M for raises, $80M for medical insurance and pensions).

School employees are under-compensated: Between 2000 and 2014 County funding for employee benefits increased from $144M to $529M, a 267 percent increase, over a period when population and inflation increased 70 percent. Average salary increases for all employees were about four percent. Why is this considered underfunded?

The County budget is underfunded: Between 2000 and 2014 County funding for employee benefits increased from $144M to $529M, a 267 percent increase, over a period when population and inflation increased 70 percent. Average salary increases for all employees were about four percent. Why is this considered underfunded?

It will create more (government) jobs: Probably not. The meals tax is not even enough to cover a one-year increase in raises and benefits for existing County and school jobs.

Pay for increased school enrollment: Seventy-five percent of school spending increases between 2000 and 2014 were for COLAs, step increases, and benefits. Only 25 percent was for higher enrollment.

Maintain quality County services: Parks and libraries account for only $50 million of the County's $1.8 billion non-school disbursements. Regarding schools, which receive $1.9 billion, according to the 2013 ACT college admissions test, only 54 percent of the 4,029 FCPS students tested were prepared for college. Only 38 percent of the 396 Hispanic and only 18 percent of the 290 African-American students tested were prepared for college. Based on SAT scores, the only readily available long-term measure of achievement by ethnic group, there has been no improvement in Hispanic and African-American achievement in a quarter of a century. These groups are disproportionally represented in the justice (documented) and welfare (assumed) systems, which account for $800 million of the County's $1.8 billion non-school disbursements.

Needed for capital expenses and debt: Between 2000 and 2015 average residential real estate taxes per household will have increased from about $2400 to $5500, a 129 percent increase when inflation increased 50 percent. Why wasn't this enough to cover compensation and capital expenses?

Need to keep up with neighboring jurisdictions: It is probably true that local governments and school districts nationwide have compensation and tax trends similar to Fairfax County. However, Fairfax County Public Schools last reported about 30,000 resumes for 1,000 job openings.

Only the rich eat at restaurants: Whether or not this is true, the jobs at risk are low-income jobs.

It's a small tax increase: That's what is said about most tax increases. The cumulative effect is not small. The Economic Development Authority publishes a handout about Fairfax County taxes for businesses locating in the County; it is nine pages long. Meanwhile according to the Census Bureau, between 2000 and 2012 persons living below the poverty level in Fairfax County increased from 43,396 to 64,600, a 49 percent increase. The solution to poverty is more small-business jobs through tax cuts, not tax hikes.