Food and beverage taxes on Indiana legislators' menu

The Greenwood Republican would like to see every community have the option of collecting a little extra revenue from bar and restaurant patrons, too.

That’s why, as chairman of the House Local Government Committee, Price wants the General Assembly to cede control over who may impose food and beverage taxes, giving cash-strapped communities a taxing option that could generate millions of dollars.

“We’re talking about people paying a few extra cents when they go out for dinner,” said Price, who prefers to call the tax a “user fee.”

“Local communities should be able to decide for themselves if that’s what they want to do,” he said.

Few have the option.

Since 1985, when the first was granted to Vanderburgh County, only 26 of the state’s 658 cities, towns, and counties have been allowed by the Legislature to adopt a local food and beverage tax. At 1 percent, the tax is added onto the state’s 7 percent sales tax on food and drink sold in restaurants.

Almost half of those communities with the tax surround Indianapolis — including the seven “doughnut” counties that agreed in 2005 to put half their revenues from the tax toward a new stadium for the Indianapolis Colts. In those counties, the tax collectively raises about $7 million a year.

Last session, Price tried to pry open the door with a bill that would have given a few small cities the authority to put a food and beverage tax to a local vote. He smacked into a wall of opposition.

This time he’s back with a broader measure that he hopes will find sympathy among legislators from outside Central Indiana, representing areas that don’t have the tax.

The Indiana Association of Cities and Towns says the legislation is one of its top priorities.

Local governments need more options to raise money, association officials argue, to replace what’s been lost through property tax caps imposed by the Legislature in 2008. The caps have reduced local government revenues by about $800 million a year.

But opposition is coming from associations that represent restaurant and bar owners who worry that an extra tax — even what may amount to one cent on a dollar — could depress patrons’ spending.

Opposing it, too, is state Sen. Brandt Hershman, R-Buck Creek, chairman of the Senate Tax and Fiscal Policy Committee. He argues that a local food and beverage tax is unfair to commuters who work in communities that adopt the tax.

“They would be taxed for something they have no ability to influence the outcome,” he said. “These are folks who would not be voting.”

Price is hoping that argument won’t hold sway. Local governments need the extra dollars to pay for needed services used by visitors and residents alike, he said.

In Price’s home community of Greenwood, populated by big chain restaurants that attract diners from outside the area, a 1 percent food and beverage tax could mean about $750,000 a year.

That pales against a $30 billion state budget, he said. “But for a small community, that’s a lot.”