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VOL. 123 | NO. 32 | Friday, February 15, 2008

Restaurant Tax Hike Sought by County

By Bill Dries

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First comes the tax proposal. Then comes the tidal wave of opposition and a crushing defeat either by popular vote or by political will.

And then the tax proposals that are an alternative to a property tax hike usually are memorialized with a pledge to try to reach a civic consensus on tax reform.

It's a pattern that has repeated itself numerous times for nearly 20 years. In most cases it's been a proposal for some form of payroll tax - either city or county - that has started the cycle.

Shelby County Mayor A C Wharton Jr. ran up the white flag on his payroll tax proposal two and a half weeks ago. A majority of the Shelby County Board of Commissioners then quickly focused on the idea of a 2 percent tax on prepared food and beverages - what amounts to a sales tax hike on restaurant food. This week, that majority approved a resolution urging the Tennessee Legislature to approve it as a tax option. Approval from the legislature is necessary to create such a tax.

Respectful opposition

Wharton is ready to risk drawing the ire of and another rejection by business leaders who have been the most politically effective opponents of such tax alternatives in the past.

"I'm the eternal optimist but I have not found anybody yet and the doors are closing," Wharton said Monday.

After a brutal reception to his payroll tax proposal this year and a real estate transfer tax three years ago in Nashville, Wharton said this week that the restaurant owners he's talked to have been the "most respectful" opponents he's encountered yet.

They also are just as dedicated to the proposition that the tax is wrong and would devastate their businesses in already difficult times. They point to the recent increase in the minimum wage and a statewide restaurant smoking ban that has hurt their late-night business.

"It seems like everybody's got their hand in my pocket," said Richard Farmer, owner of Jarrett's restaurant.

Even Wharton admits the idea of dialogue has come to mean no change.

"I guess I'm an old hand at it now," he said. "Everybody just flocks back to their favorite road of least resistance, namely increased property taxes."

Possible concessions

Wharton is offering some concessions as he prepares to return to the hallways of the state capitol in Nashville with the resolution. This week he said he would consider tax terms that would offer a reduced rate for restaurants that provide health insurance for employees. He also talked of putting some of the revenue from the tax into a fund that would be used to promote the local restaurant industry.

County Commissioner J.W. Gibson was critical of complaints without alternatives to what he and Wharton and others on the commission insist is a real revenue crunch that can't be solved by cutting county expenses.

"I think it's incumbent on all of us to step up to the table and do the right thing when we're called upon to get involved," Gibson said. "We can no longer just sit back and send text messages, make nasty phone calls and make threats."

Gibson said he found comments from Half Shell restaurant owner Danny Sumrall "disturbing" because he thought Sumrall was putting the onus for solving the revenue problems back on the commission.

Sumrall, serving as spokesman for the Memphis Restaurant Association, countered, saying he wasn't washing his hands of involvement.

"I don't have a plan. I'll be happy to look into where I believe we could make cuts, if you believe that is appropriate. I don't have your expertise," Sumrall said as he talked of the employees he provides health insurance for - employees he said he may have to lay off in some cases if restaurant patrons react adversely to the proposed 2 percent tax.

"That's 150 people that aren't going to The Med that are getting taken care of without public and county dollars. So we provide a lot of benefits for people that people don't recognize. And to continue to burden us with this, I think is just counterproductive."

Eyes on Nashville

Commissioner Steve Mulroy suggested pushing for the legislation just minutes after Wharton called it a day on the payroll tax idea last month. At the time, he said a 2 percent food and beverage tax primarily would affect the wealthier part of the local population.

By Monday, Mulroy told the restaurant delegation that he hadn't made up his mind.

"I get it and I understand it," he said of the restaurant industry concerns. "My vote today is to see if the legislature will give us this as an option to consider."

Commissioner Henri Brooks, a former state representative, was one of three votes - along with Wyatt Bunker and Chairman David Lillard - against the resolution, which she predicted won't get much further in Nashville than the payroll tax did.

"We cannot continue to tax citizens. I am not in favor of this. I will not vote for this. When we pass a resolution, we don't pass a resolution just to float it. Y'all remember the wheel tax?" Brooks said referring to the countywide tax that shows up annually with car tag renewals and has remained a popular target of tax opponents.

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