Restaurant industry reacts to restaurant tax proposal for Ky. ci - WDRB 41 Louisville News

Restaurant industry reacts to restaurant tax proposal for Ky. cities

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LOUISVILLE, Ky. (WDRB) -- A proposed restaurant tax is gaining momentum in the state legislature, but the bill has yet to be pre-filed.

Restaurant owner John Varanese is prepping for dinner at Varanese Restaurant on Frankfort Avenue. He says a restaurant tax would hurt the industry.

"My firm stance is again not do it to an industry. If you are going to do it, you need to run it across everybody, you need to tax it all," Varanese said.

The proposal is part of the Kentucky League of Cities 2014 Legislative Agenda. KLC has not said which legislators it's working with to sponsor the bill, but says the proposal is a way to get additional revenue for cities.

The group is seeking legislation to impose a restaurant tax on all cities, not just fourth- and fifth-class cities, which have a smaller population. The restaurant tax for those cities currently is up to 3 percent.

The Kentucky Restaurant Association is opposed to the plan and says consumers should be as well.

"Obviously local restaurant owners are going to pass that cost on to their consumers because if they could automatically charge a few more percent, they would because the profit margins are so very small in a restaurant," said Stacy Roof, president and CEO of the Kentucky Restaurant Association.

KLC says out of the money raised from a restaurant tax, a maximum of 75 percent of revenue would go to what it calls "quality of life enhancements" since cities are having a hard time paying for items like retirement bills. KLC also says at least 25 percent would go to local tourism commissions.

"In most cases, the public doesn't know about something like this until it gets passed and we want to change that," said Roof. "We want the public to know, so they can contact their legislators."

"The bottom line is that the 3 percent is going to affect each family another $150 a year, and again, change some people's decisions to go out and eat," Varanese said.

The League of Cities released this statement to WDRB:

"The top legislative priority for cities in 2014 is revenue diversification. Much like the state, cities are struggling with the one-two punch of stagnant or declining revenue streams and rising expenses. Cities everywhere are struggling to fund core services like public safety and sanitation, and yet still must find resources for aging infrastructure and costly environmental mandates.

We made tremendous progress with retirement reform last session, but cities still must pay the retirement bills to make the system whole. Cities started to feel the sting of mandatory retirement costs years ago, so city officials began making deep cuts then. Long before the recession, cities slashed departments and programs, reduced personnel and went without important projects. But unlike the state, cities do not have additional revenue options to pay for what is passed down.

To better address these financial demands and to respond to the changing economy, local officials need more diversified revenue options. Cities would like to expand the restaurant tax to include all cities, not just fourth and fifth class cities . . . and cities are willing to forgo collection of net profits and gross receipts taxes on restaurants if the local leaders vote to exercise the option if it is given to them. We want to let local elected officials, not appointed officials, control how the majority of the revenues are spent. KLC encourages the legislature to act on it this session."

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