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Food and Beverage Taxes…

in the General Assembly

The current budget shortfall in the funds needed to operate Lucas Oil Stadium and Conseco Fieldhouse has once again placed the hospitality industry at the center of a debate that could result in an increase in restaurant and hotel taxes. A 1% increase in either would give Central Indiana the highest combined hospitality tax rate in the country.  The combined tax on restaurants would be 10%.  The combined tax on hotels would be 17%. Restaurants and hotels currently account for $82 million per year of the operating budget for Indianapolis sports and convention facilities (75%). The average restaurant in Central Indiana currently pays $10,000 to $20,000 in hospitality taxes.

 The Capitol Improvement Board operates these facilities and they have instituted budget cuts in an attempt to address the shortfall but that only trims their projected operating deficit from $43 million to $35.6 million. 

 Any new funding for the CIB would have to be authorized by the Indiana General Assembly before they adjourn on April 29^th.

IRA POSITION

The Indiana Restaurant Association is opposed to increasing hospitality taxes to fund local government shortfalls.  Raising taxes on hospitality industry is bad for business, jobs and economic development in our communities especially in our current economy.   Innkeeper’s taxes and food and beverage taxes should be reserved exclusively for tourism development and promotion.

Should basic necessities be taxed?

The Indiana Restaurant Association believes that necessities such as food, shelter and medicine should not be subject to the sales tax. Family Meals Taxes are extremely regressive because they tax a basic necessity of life that everyone, regardless of income, must find some way to include in their budget. Family Meals Taxes are often rationalized as a tax on non-residents or a luxury tax. In fact, residents pay most of a new tax.

Why is there a food & beverage tax to begin with?

Originally family meals/food and beverage taxes were introduced to fund a special project generally related to tourism and benefiting the restaurant industry indirectly. Now a family meals/food and beverage tax is seen as a painless way to fund local government excesses. It is not really painless.

How long will we have the food & beverage tax?

Most meals taxes in Indiana have contained a “sunset” provision that promises the tax will go away at some future point when the project to be funded is paid for. As of today none of the existing restaurant taxes have ever been sunsetted. In Indianapolis, Evansville, Fort Wayne and New Castle the tax has been extended for new projects instead of honoring the sunset provision.

Wouldn’t it be refreshing if these promises were kept?

In The Press:

Indiana Economic Digest:  Indianapolis Capital Improvement Board to tackle $20 million deficit

                                              Indianapolis CIB in Crisis

Inside Indiana Business:  CIB Makes More Cuts