Guest editorial: Bad recipe for business
Restaurants are notoriously risky businesses. Many operate on a narrow margin. Some cannot survive even a small downturn in business.
Since Rhode Island has a reputation for fine eateries, and earns a lot of money from tourists who do a lot of eating out, politicians should be careful about making it harder for these classic small businesses to survive. And yet Governor Chafee has proposed to hammer them with a whopping increase in the meals and beverage tax.
The governor’s budget seeks to hike the tax from 8 to 10 percent — a 25 percent increase. While his aides discount the impact of such an increase — a $10 pizza, for example, would cost $11 instead of $10.80, state Administration Director Richard Licht observed — advocates for restaurants and bars know that taxes add up over time, reducing their ability to compete.
In restaurants and bars on both sides of Rhode Island, meals taxes are much lower: 6.25 percent in Massachusetts, and 6.35 percent in Connecticut. Rhode Islanders can eat out for less all along the border: in such places as Oxford, Douglas, Uxbridge, Millville, Blackstone, Bellingham, Attleboro and Swansea.
So Ocean State restaurant and bar owners have put up a fight. Backed by citizens groups and the Rhode Island Hospitality Association, they thronged the State House last Wednesday to protest the governor’s plan.
Rhode Island can ill-afford to force small firms to board up, conceivably costing the state more revenue than the hikes would raise over the long haul.
Some pizza-shop owners, particularly near the border, fear that a 10 percent tax would send their customers over the state line to pick up their pies. Other restaurant owners worry that residents would simply cross eating out off the list. Waiters and waitresses worry that many customers would make up the difference by leaving smaller tips.
Those who put on big expensive events, such as weddings or conventions, fear the tax would make them uncompetitive, sending business to other states. It’s not a long drive!
This is a bad recipe. The General Assembly should dump the meals-tax plan down the garbage disposal well before it gets to the main menu.
Reprinted with the permission of The Providence Journal, where it appeared Sunday, March 25.