Little did I know that when I left a comment in the Watertown TAB blog about Governor Deval Patrick's plan to allow municipalities to raise their own meals taxes that I would be quoted twice in the print addition, once in their story on the local option taxes, and once in their Friday editorial. I've been mostly silent on the topic of meals taxes on this blog, so here's what I wrote at the time, which is still how I feel about it having a few more days to think about the issue:
I definitely think that the decision to tax meals, etc., should be in the hands of the local government, and not the state. Each community in Massachusetts has different strengths, and they should be allowed to choose revenue sources that match those strengths. That said, I don’t think it makes sense for Watertown to adopt a meals tax. I don’t think we have enough restaurants to justify it, and most of those that we do have are locally owned. Let’s let Boston and Cambridge enact the meals tax — maybe people will start coming here to save a few bucks on dinner.Now, I don't really think that people will make their dining decisions based on a 2% meals tax difference. If you're driving further to save a few cents on dinner, you may end up spending that much or more on gas alone. It doesn't make economic sense. Still, I'm not sure that the money Watertown would get from enacting a local-option meals tax would be worth either the political battle to pass it or the potential strain it would put on our restaurants here, most of which are, as I mentioned, locally owned. That said, communities with large restaurant and tourism industries -- Boston, Cambridge, Cape Cod, etc -- should not be stopped from adding a revenue source if their residents approve.
I did also want to point out this little bit of hyperbole from Watertown town councilor (and restaurant owner) JD Donohue who was also quoted:
Personally as a consumer, I think our meals tax is already at a limit that we are used to. Anything higher is taking an affordable meal and making it unaffordable.A 2% difference is not going to turn an affordable meal unaffordable. If you can afford paying $25 for dinner, you can afford to pay $25.50. Even if you decide you can blow $200 on a night out, an extra four bucks is not going to break the bank. So, it's silly to say that a small meals tax increase would make any individual meal unaffordable. Cumulatively, though, the tax could have an impact. Let's say you eat lunch out every weekday, and it costs you about ten dollars. Over the course of a year, the 2% difference in tax rates would cost you roughly an extra five lunches. So, maybe instead of eating out every day, you brown bag it once in a while to defray the increase, and the restaurant you frequented loses a little business.
I haven't had the chance to run any numbers, but what I would really like to see is the lowering of the state portion of the meals tax to 3%, and the cities and towns given latitude to raise their own taxes up to an additional five percent. I think would be more attractive to municipalities if they could keep their overall meals tax level, but potentially keep more money from leaving town. Or, individual towns could opt to not raise their taxes above the minimum at all, and consumers would end up paying less there than they do now.