The Ashland food and beverage tax

In March 1993, voters approved a 1 percent Ashland food and beverage tax, also providing the City Council authority to increase the tax to as much as 5 percent to acquire park land. The 1 percent tax was to repay a $24 million loan in conjunction with a $34 million mandatory upgrade of the city's sewage treatment plan.

In May 1993, the City Council increased the tax to 5 percent and reversed the formula, 1 percent for park acquisition and 4 percent to retire the sewer plant loan by 2024. Businesses withhold 5 percent of the amount collected to defray collection costs. Receipts from the tax are shown in the table, with those from supermarket delis distinguished. The declining annual debt (column 7) is paid by the meals tax, with any shortfall (column 8) made up from sewer taxes. The city's current 785 acres of park and open space, 360 acres acquired in part with meals tax revenue, apparently puts a park within 1/4 mile of 95 percent of all residents.

The November ballot contains a proposal to renew the expiring meals tax that will continue the 5 percent tax until 2030 and will allow capital improvement and acquisition of parkland. If the meals tax does not pass, the city, having increased sewer rates by 20 percent in April 2009, plans to raise them about 60 percent more, or to 192 percent of the March 2009 rate. It is unclear why the extension is until 2030 although the sewer debt will be paid by 2024 or what will be done with the extra money when the debt is paid.

Tax policy is a matter of balancing possible taxes against at least seven criteria. First, taxes should be fair, but the word has three meanings. For example, for income taxes, fairness as equity leads to a progressive tax, as equality leads to a flat tax, and as need leads to a negative income tax. The meals tax puts approximately 70 percent of the burden for sewer indebtedness on restaurant customers, who are some unknown combination of residents — some restaurant-goers, some not — and tourists.

Taxes should be inexpensive to collect. Five percent of the meals tax stays with the restaurants to compensate for collecting the tax. Restaurant owners with good computer systems feel this is adequate. Reportedly, half of one city staff person's time is devoted to meals tax issues and the legal staff sometimes does meals tax work, particularly when restaurant owners are taken to court for non-compliance.

Taxes should minimize economic impact. Usually, taxes should not discriminate for or against one economic sector, although some such as carbon, cigarette or liquor taxes overlook the principle for policy reasons. The actual impact of the meals tax is disputed. Restaurant owner opponents found an almost even split on whether 120 randomly selected residents of three surrounding towns make restaurant decisions based on the tax, but some restaurant owners feel the tax has little impact on where people eat. Owner proponents argue that it is not broke so does not need fixing, particularly as it will be difficult to find a replacement source of revenue.

Tax revenue should be stable and predictable. If revenue varies wildly, legislators tend to increase spending in good years, creating problems during recessions. The difference between the highest and lowest years over five years is $171,000 (column 2).

Taxes should be unavoidable. The city apparently makes no systematic effort at audit or enforcement except in a few cases of complete avoidance; doing so presumably would increase both costs and revenue by some unknown amount.

Taxes should be understandable. The meals tax is easy to understand, but so is the sewer tax. The situation is more complicated for bed and breakfasts, which can either pay a straight 10 percent room tax (1 percent state, 9 percent city up from 7 percent) or pay the lower meals tax on an amount allowed by the city for breakfasts and the higher tax on the remainder. A convoluted state law determines much of how receipts are expended, leaving unclear how much, if any, of bed and breakfast taxes pay for sewers and parks in Ashland.

Finally, taxes should be visible. People should know what taxes they are paying. As a sales tax is rare in Oregon, it is unexpected, so not completely visible. Out-of-state tourists are unsurprised; Oregonians from outside Rogue Valley often are.

We hope that the criteria and some history and data will help each citizen make a more informed vote on the meals tax.

The League of Ashland Voters is a political action committee. Principal authors of this piece are David Churchman, treasurer, Bill Heimann, director, and Eleanor Savage, researcher.

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