Restaurateurs Push Against Proposed Tax That Could Hit Customers

LOUISVILLE, Ky. – There could be an added charge to your table’s check soon, depending on which city you eat-out in. Because of an older Kentucky law, some cities are already allowed to charge a restaurant tax of up to 3%; other cities cannot. A recent push from city leaders in Louisville to allow the largest city in the Commonwealth to levy the tax has lawmakers considering the measure this legislative session. Some feel it’s only fair that all cities be able to charge up to 3%. However, not everyone is supportive. Some restaurateurs are pushing back. 

As the chef at Bristol Bar & Grill, Inc. keeps busy preparing dishes in the kitchen for customers in the dining room, Operations Director T.J. Oakley helps keep the place running. “Louisville is a ‘foodie’ city, and we’re really proud to be a part of this culture,” Oakley remarks. 

He admits, there have been a number of restaurants to close shop over the last two years in Louisville. Oakley fears business at his restaurant would look a lot different, if a new 3% tax were added to his customers’ checks. 

“Putting a tax on restaurants doesn’t mean that people would have increased, disposable income. It just simply means that less revenue will be coming into the restaurants,” Oakley argues. “I think it’s inevitable. I think basic economics say whenever you increase prices, you’re going to decrease demand,” he adds.

Louisville is one of the Kentucky cities that cannot, by state law, levy a restaurant tax. There are others also kept from doing so, like Lexington, Covington, Florence, and Bowling Green, to name a few. According to The Kentucky League of Cities, 49 cities currently do have the tax. Louisville leaders, like Mayor Greg Fischer, have recently floated the idea of allowing the city to impose the tax,  to raise revenue to help the city fund employee pensions. 

“Bottom line, cities have to have revenue, and a fair way to do that is based on the people that are there, without putting the burden all in one area,” Kentucky League of Cities (KLC) Executive Director J.D. Chaney says. He argues that business won’t slow because of any added tax, claiming it hasn’t for the cities that already have it. 

“It’s a bit of a false assumption to say that people are not going to continue to eat out. The beauty of the restaurant tax and it being consumption-based, is that people come into your community and enjoy that infrastructure from out of state from outside of your community and it’s a way for them to contribute,” Chaney explains. 

KLC has run estimates on how much money the tax would raise for cities. According to their spreadhseet of data, Louisville could gain about $41 million from a 3% tax. Lexington could gain about $26 million.

Oakley asks that lawmakers consider the people who’d most likely be impacted the most. He names single moms, restaurant employees, and working families. He says some people eat out, out of necessity.

Chaney says legislation to allow all cities to levy a restaurant tax of up to 3% is currently being drafted, and will be filed; the measure wouldn’t mandate the tax, but instead allow city leaders to decide for themselves whether to have it.