Prepared foods tax projects list takes predictable political turn
August 13, 2008
From the Could've-Seen-That-Coming Dept.: The debate over the 1% prepared meals tax took an interesting direction on Tuesday, with a city/county panel endorsing a target list of projects to be funded by the mechanism.
As expected, the Minor League Baseball museum is proposed to receive $14 million in funding from the tax, which would provide both cash outlays and support for borrowing.
An expansion of the Hayti Heritage Center, which has also been identified as a recipient of funding, is projected to receive -- why, $14 million in funding, too.
As Ray Gronberg notes in the H-S this morning, it's clearly a political maneuver to try to garner support among Durham's black voters, and possibly members of the Durham Committee on the Affairs of Black People, whose chair, Lavonia Allison, has come out strongly against the tax.
The Museum of Life and Science, Durham Civic Center, a Parrish Street "Black Wall Street" museum, and an environmental education center would share borrowed funds slightly larger than each of the MiLB and Hayti projects. Trails and upgrades to the Durham Co. Stadium would also receive some funding.
As Gronberg notes:
Allison's recent comments about the tax never really seemed to trouble Bell, who a couple weeks ago signaled in a conversation with a Herald-Sun reporter that he saw an opportunity to do some politicking.
Other sources confirmed Tuesday that there had been talk of the city's trying to "put some carrots out there" to sway the Durham Committee.
If the comments at the H-S, which are running pretty virulently opposed to the tax, are any indication, it could be a long slog for Bell, Clement and others to push this one across the victory line this November.
When are the comments at the Herald-Sun indicative of anything? Half the commenters even admit they don't live here. (Which raises an interesting question -- is traffic driven from Liestoppers what's keeping the Herald-Sun afloat?)
$14 million is a bit more than I'd like to see the city in for on the MiLB, what with nothing going to the still-absent history museum, other than a couple mil for Parrish St. But $14 mil to Hayti doesn't seem like a bad compromise -- I just hope it includes another black box theater.
Posted by: Michael Bacon | August 13, 2008 at 11:48 AM
I wonder why none of this money is slated to help pay the debt service on existing projects such as the new Durham Performing Arts Center? That would free up some revenue for TomBon to fix the streets...
It would also be more palatable than some of the items on this list, such as $6 million for the Marriott's ballrooms, or money for the high school football staduim. This list is taking great liberty with the definition of 'tourist attraction'.
Posted by: Todd | August 13, 2008 at 12:19 PM
I like that they have dispersed the money better instead of giving $25 million to the MiLB museum. I would like to see the Civic Center axed completely and give more money to trails. Though I don't like the idea of increasing sales tax on meals, we will see more money from those who commute in from Wake County every day to work in Durham... and Wake is already collecting this from us when we eat there, so I guess this will balance it.
Posted by: Joshua Allen | August 13, 2008 at 01:53 PM
Joshua: In reality the Minor League Baseball museum is going to cost Durham taxpayers $28 million because the city/county has to bribe black voters to make it happen.
Posted by: Wes | August 13, 2008 at 02:50 PM
Some of this money really should be spent on debt service for the 'cultural amenities' already built or under renovation:
DPAC
DAP
DBAP
Carolina Theater
Then maybe there would be enough money left in the general fund to fix the bathrooms in the city parks.
At least the baseball museum would come with a significant investment of private money from the minor league baseball folks. The city is leveraging a bit of investment there.
However, with Hayti, the civic center, and county stadium, that money does not come with any outside investment, and little return on investment.
Of course, there's always the chance that like with recent bond issues, what the money is eventually spent on could be completely different.
Posted by: Todd | August 13, 2008 at 03:38 PM
"....we will see more money from those who commute in from Wake County every day to work in Durham... and Wake is already collecting this from us when we eat there, so I guess this will balance it."
I think that's the heart of the matter. Why is it so hard for Durhamites to recognize this fact? We just keep passing bonds and more bonds that our children and grandchildren will have to pay off at some point, whereby the citizens of Durham have to bear 100% of the financial burden. Tax rates have to go up to pay off the interest on the debt, but most people reason that if everyone in the county has a small share of the burden, it somehow means lower taxes. The same is true of the food tax.
Most of the revenue from the prepared foods tax will come from visitors and/or those who have it in their budgets to eat out. Whether you can only afford a Big Mac once a week, or a dinner for four at Chamas, it's a voluntary tax that you can decide how much you want to pay...or stay home and save gas.
People who can afford to pay an extra 1% for a dinner for four at Chamas, which can go up to $200, will net the city $2. Does anyone seriously think the tax will deter folks from eating out or keep the waiter from getting their 15% tip?? People who eat out generally have the time and money to visit our cultural assets, which in turn creates more jobs and improves the overall quality of life and image of the city of Durham.
People who say they can't afford the extra 1% can buy a smaller portion of french fries each week, and gain an extra healthy few years of life in the process. If they don't have time or money to go to an upscale restaurant, they won't be paying much of a tax anyway.
I think the opposition from Lavonia and "the community" comes from a misplaced notion that the spending on "cultural activities" in Durham is disproportionate to what "white folk" like, instead of improving the welfare of the city's black and low income population by building things like swimming pools, job training centers, improving low-performing strip malls with public money, day care for teenagers, etc. How often has the white community opposed giving more and more to poorer areas of the city? Our own city council often splits funding votes on community center swimming pools along racial lines. Given how divided our city often is on many topics, it's easy to paint a picture of how all these higher taxes and fees end up only supporting either side rather than the things that bring us together. Improving things like the Carolina Theater with bond money, just because it has become easy to pass the perennial bond, in ways that draw strong opposition from either side will only make the problem worse when it comes time to fund the critical infrastructure needs of the entire community.
It's time to get everyone on board with this prepared meals tax. It's time for Durham to start cashing in on our investment in revitalization by getting citizens of surrounding communities and out of state to pay their share, just as we are expected to when we travel away from home.
Posted by: GreenLantern | August 13, 2008 at 07:39 PM
As far as I am concerned, the proposal does not really do it. I just don't think it is really the duty of tax payers money to go fund projects that promote private enterprises such as the MILB. If the league wants a museum of its own, why can't it pay for it or ask for private donations to fund the project?
I would rather see this money go into our schools, our public parks and yes into downtown.
And the Argument, if Raleigh has it we ought to have it too, does not do the trick. Downtown Raleigh is quite pathetic in terms of entertainment and restaurants.
Posted by: JG | August 13, 2008 at 10:49 PM
I wouldn't object to this tax if it was imposed on all restaurants where the average meal price was over, say, $8 at lunch or $15 at dinner. As it stands, it's a really regressive tax.
Posted by: durhamfood | August 14, 2008 at 08:26 AM
Setting aside the debate about the structure of the tax, I wonder whether the projects that have been named are really priorities for Durham even within the category of cultural amenities. They seem to me to be designed to draw visitors to Durham as opposed to improving the quality of life for those who live here. Our city really needs much more investment in infrastructure and activity centers that improve the day-to-day lives of its residents. Plus, if I may vent for a minute--I would love to see the data that suggests that many people are going to come to Durham to visit these venues. I just don't see them as all that compelling. My guess is something like the baseball museum, excluding field trips (kids don't add all that much economically when they troop in and out on their buses), gets something like 100 visitors a week. Is that worth the kind of figures that are getting thrown around? Not in my mind. Even if you can scrounge together some data to show they work on their own terms, I have to believe the opportunity costs of missing out on benefits that could come from better investments would dwarf those cost-benefit figures!
Posted by: Keith | August 14, 2008 at 09:29 AM
I'm not taking a side on whether the prepared meal tax is a good idea or not. But as an economist who studies poverty and inequality, I was surprised to see the tax described as regressive.
A regressive tax is one in which lower-income people pay a higher proportion of their income towards the tax than do higher income people. According to the Consumer Expenditures Survey, households in the bottom quintile of the income distribution (who average $9,974 in income) spend 5.2% of their income on "food away from home" (the CEX category that approximates "prepared meals"). The next quintile (average income: $26k) spends 5.5%. The third quintile (average income: $45k) spends 5.8%, and the fourth quintile (average income $71k) spends 5.9%. For the highest-income 20% (average income $151k), the percent drops back down to 5.4%, but is still above the percent of income spent by the poorest group. You can see the numbers here: http://www.bls.gov/cex/2006/share/quintile.pdf
So by the traditional definition, this is a--slightly--progressive tax. Of course, exempting the first $8 of the meal, as someone suggested, would certainly make it more progressive.
The other question I was curious about is, how progressive is this tax compared to the other main means of revenue-raising in Durham, the property tax? A look at the same table, on the line for "housing expenditures," reveals the following [note that economists believe that renters also pay property tax, because landlords raise rents proportionally when property taxes rise]:
Bottom quintile: 39.8%; second quintile: 36.3%; third quintile: 34.3%; fourth quintile: 33.1%; top quintile: 31.9%.
Since the share of income spent on housing falls dramatically with income, while the share spent on food away from home rises slightly, a prepared food tax is significantly more progressive than a property tax. (It's also much more progressive than an overall sales tax, which is highly regressive.)
None of this is to say that the proposed tax in this case is a good or bad idea--but it's not regressive, either absolutely or in comparison to other means at Durham's disposal for revenue-raising.
Posted by: Liz Ananat | August 14, 2008 at 01:02 PM
Fair enough, I stand corrected. As for property taxes: I'm entirely against property taxes for lower-income folks, and believe that sales taxes should be higher on luxury items and negative on basics.
I'm against this tax as it stands because I don't believe the poorest sections of Durham's population should have their tax burden increased at all. Therefore I'm against anything but highly-progressive taxes. As proposed, this doesn't fall under that category.
Posted by: durhamfood | August 14, 2008 at 02:38 PM
Liz,
Setting aside the $8 exemption, I wonder how the numbers would look if you were using disposable income. Might not match the formal definition, but the point is that the tax would be harder on lower-income families. It seems to me that's the bit that matters in the debate here.
Posted by: keith | August 14, 2008 at 03:19 PM
@durhamfood: right on. It is immoral to take money from the poor and spend it on attractions they are unlikely to visit. I can't believe more people are not upset about this.
Even if one supports the tax in principle, Durham's track record on these types of issues (e.g., bond referenda) is so poor that there's a reasonable suspicion of how the funds will be used if the tax passes.
Posted by: KeepDurhamDifferent! | August 14, 2008 at 04:21 PM
If the restaurant tax was paired with an elimination of the 2% sales tax on groceries, it would be a far more progressive and acceptable tax.
But as a standalone tax increase, combined with some of the questionable items to be funded, no provision to use the tax to pay off existing debt on things like the new Performing Arts Center, and the City Council's recent history of playing bait and switch on bond-funded projects, you really have to wonder what our elected officials are thinking.
Posted by: Todd | August 14, 2008 at 10:25 PM