Northern Virginia, particularly Fairfax County, has become a mecca for food aficionados.  With James Beard award nominees, globally celebrated restaurants, coffee shops, bakeries, wineries, and breweries throughout the area, the options for eating out, taking out, or delivery abound at any price point the wallet will allow.  However, that may soon change. 

Fairfax County, which is the fifth wealthiest county in the U.S., has a budget for fiscal year 2024 that is estimated to raise $10.34 billion and spend $9.95 billion.  Citing declining revenues from commercial real estate, on May 21, 2024, the Fairfax County Board of Supervisors in Virginia voted nine-to-one along party lines to initiate a study to explore implementing a new 6 percent tax on prepared food and beverages at restaurants and convenience stores throughout the county of 1.1 million residents and more than 31,000 businesses.  The tax would apply on top of the sales tax of between 5.3 and 7 percent that already applies to restaurant food statewide.  The board's decision aims to diversify the county’s revenue streams by reducing its dependence on real estate taxes, which, given the county’s median selling price of $750,000, impose an unpopular financial burden on homeowners.  The move, however, raises serious concerns among local restaurants, grocery and convenience stores, and consumer advocates.

The proposed meals tax would disproportionately affect lower-income residents, stifle the local foodie culture, and likely put many food service workers out of a job.  Empirical studies consistently show that lower income households spend a larger portion of their income on food than higher income households.  According to the U.S. Department of Agriculture (USDA), “In 2022, households in the lowest income quintile spent an average of $5,090 on food (representing 31.2 percent of income), while households in the highest income quintile spent an average of $15,713 on food (representing 8.0 percent of income).”  A regressive tax like the proposed food sales tax will therefore fall hardest on the 5.98 percent of county residents who live below the Federal Poverty Line and the 24 percent of Fairfax County residents identified as “food insecure” in a report issued September 2023 by the Capital Area Food Bank (CAFB), meaning they lack consistent, reliable access to “nutritionally adequate and safe food,” according to the USDA. 

A tax that will cause an increase in prepared meal and beverage prices will likely also cause consumers to pull back on dining out and have a negative impact on the 23,668 Fairfax County residents who work directly in food preparation and service, according to the U.S. Census Bureau.  Another local regulation that raised meal prices provides a concerning example. 

District of Columbia (D.C.) residents voted in a 2022 ballot referendum to incrementally raise the base minimum wage for tipped workers to $15 per hour by 2027, to equal the minimum for non-tipped employees, beginning with an increase to $6 per hour on January 1, 2023, $8 per hour on July 1, 2023, and $10 per hour on July 1, 2024.  While data from the U.S. Bureau of Labor Statistics and the National Restaurant Association show that employment in the restaurant sector in 29 states has bounced back from pandemic levels such that the March 2024 employment total exceeds the March 2019 level.  Even before the hourly wage increase to $10, D.C. has moved in the opposite direction.  Employment in D.C.’s restaurant sector declined by 6.7 percent over that five-year period, from 55,200 to 51,500 employees, a sharper decline in jobs than any state besides Vermont, Maryland, and Hawaii.  Over the same five-year period, Virginia’s restaurant employment declined by 2.1 percent.

Despite these concerns, supporters of the meal tax consider it a necessary step to diversify the county’s revenue base to reduce dependence on real estate taxes.  A May 21, 2024 Washington Post article stated that “residential tax revenue accounts for 66 percent of the county’s general fund after remote working hurt the commercial real estate market.”  The Fairfax County Board of Supervisors’ April 2024 decision to approve a final budget for Fiscal Year 2025, which raises real estate taxes by an average of $450 per year, upset many homeowners.  

Tax increases on food have also proven unpopular with voters.  The Post noted that “voter referendums on meals tax proposals in 1992 and 2016 were defeated by large margins.”  However, in 2019, the Virginia General Assembly enacted a state law permitting jurisdictions to impose a meals tax without voter input.  This change allowed neighboring Prince William County to implement a 4 percent meals tax in 2022 over the vocal opposition of Republicans on its county board who pledge to repeal the regressive food tax if given the opportunity.

Fairfax Supervisor Pat Herrity (R-Springfield) voiced strong opposition to a meals tax, arguing that it “unfairly targets the food industry and would disproportionately affect lower-income residents who can barely afford to eat out.”  Herrity's concerns highlight the regressive nature of the tax, which could exacerbate financial pressures on those already struggling with the rising cost of living.

A 6 percent county meals tax would be the highest rate in Northern Virginia, surpassing the 3 percent tax in the Town of Vienna; the 3.5 percent tax in Leesburg; the 3.75 percent rate in Herndon; the 4 percent rate levied by Arlington and Prince William counties as well as the municipalities of Dumfries, City of Fairfax, Falls Church, Manassas, and Manassas Park; and the 5 percent rate in Alexandria.  Neighboring Loudoun County, meanwhile, has no trouble funding  its multibillion-dollar annual budgets without any added tax on prepared food, despite charging a lower base real estate tax than Fairfax County.  

In contrast to the proposed meals tax, the Virginia General Assembly has taken steps to ease the tax burden on groceries.  In the 2022 legislative session, citing voter concerns with inflation, the Assembly eliminated the 1.5 percent statewide sales tax on groceries and reduced the maximum county-level grocery tax to 1 percent, effective in 2023.  Sen. David Suetterlein’s (R-Roanoke) effort in the 2024 session to eliminate the local grocery tax entirely, however, failed to gain traction. 

The Commonwealth also continues to tax food items sold through vending machines at higher rates than the same food items when sold in grocery and convenience stores or other retail outlets, despite the fact that the manufacturing, distribution, maintenance, and stocking of vending machines and other “unattended retail” points-of-sale employs 3,807 Virginians and contributes more than $700 million in economic activity for the Commonwealth, according to the industry’s trade association.  While the tax under consideration in Fairfax would exclude packaged food, it would still impact grocery and convenience stores that prepare fresh meals. 

Fairfax supervisors have defended the need for additional revenue, attributing the shortfall to inadequate state funding for public schools despite the fact that the board voted in November 2023 to approve substantial pay raises for themselves, effective in 2024.  Board Chairman Jeff McKay, who supported the meals tax study, voted to give himself a 45 percent raise of $45,000 on top of his existing $100,000 salary for his part-time position, along with a 37 percent raise of $35,000 for each of his nine fellow supervisors who currently receive $95,000 a year for their part-time roles.  Since retirement benefits are usually based on employees’ last three years’ salary, the decision raises those payments substantially as well.  Chairman McKay’s 45 percent pay raise is not only outrageous on its face, it is also 183 percent greater than the 2 percent cost of living adjustment included in the budget for the county’s 12,000 public employees.

Chairman McKay has complained that remote work has reduced the county’s commercial real estate tax revenue, pushing more of the county’s costs onto fewer homeowners, yet he has opposed moves to expand the residential tax base.  In January 2024, McKay opposed lifting restrictions on the construction of multi-unit dwellings that could boost property values and generate more revenue for the county without increasing property tax rates. 

The proposed tax will hit the pocketbooks of Fairfax County’s 410,800 households, 4,262 restaurants, and numerous convenience stores.  Economic theory suggests that when the government taxes something, people tend to do less of it.  Applying this principle to Fairfax’s food industry could stifle the ambitions of local entrepreneurs and food enthusiasts who aspire to transform the county into a culinary destination known for its gastronomic creativity.  The higher tax will likely push residents to restaurants in easily accessible surrounding (and even wealthier) municipalities with lower meals tax rates or to Loudon County which has no meals tax.  Fairfax County should reduce excessive spending rather than raising taxes on food establishments, and the supervisors should serve themselves a less generous helping of taxpayer funds.