Critics Can’t Stomach Detroit Mayor’s Fast-Food Tax Proposal

Published July 1, 2005

Detroit Mayor Kwame Kilpatrick has proposed a 2 percent tax on fast-food purchases, alarming critics who say it would fall mainly on low- and middle-income persons and would slow economic development.

Kilpatrick proposed the fast-food tax in April to help close a $300 million city budget deficit. He estimates the tax would bring in $17 million a year. The tax would come on top of Michigan’s 6 percent state sales tax on restaurant meals. It would apply to any food item sold at a fast-food restaurant, including low-fat and low-calorie salads.

If the tax is approved, Detroit would become the nation’s first major city to levy a special tax on fast-food meals.

“That means if a Happy Meal costs $2.99, the total cost will be $3.05, with the 6 cents coming to the city,” Kilpatrick said in his April 12 budget proposal. “If you buy a medium fry for $1.05, the total cost will be $1.07. It’s a small amount for the individual customer, but it adds up to a meaningful amount to preserve essential city services.”

Voters’, State’s Approval Needed

A spokesman for the mayor’s office said a vote on the budget should take place before July 1, which marks the start of the city’s 2006 fiscal year.

But before the tax can take effect, Detroit voters would also need to approve it, and state law would need to be changed. Some political observers say such a change will face skeptical lawmakers in Michigan’s Republican-controlled legislature.

Nevertheless, a move to make the change is already underway.

On May 17, State Rep. Marsha Cheeks (D-Detroit) introduced House Bill 4804 to allow Detroit to levy a 2 percent excise tax on fast-food restaurant sales. The bill was referred to the House Tax Policy Committee that day.

‘Going to Bloomfield Hills’

“Just tell him we’re going to go to Bloomfield Hills to McDonald’s if he puts a tax on it,” said 18-year-old Ebony Ellis, referring to an affluent Detroit suburb, to Associated Press reporter Sarah Karush in a May 8 article. Ellis and four friends were eating at a Golden Arches in Detroit at the time. Karush said the high school classmates told her they eat at McDonald’s every day after school because their schedule doesn’t leave them time for lunch.

Andy Deloney, director of public affairs for the Michigan Restaurant Association, said virtually all of his organization’s members oppose the fast-food tax idea.

“Big or small, none of my members really like it,” he said.

Jordan J. Ballor, associate editor with the Acton Institute for the Study of Religion & Liberty in Grand Rapids, Michigan, addressed the issue in an article on the Acton Institute Web site.

“As a rule, governments should not seek quick and temporary fixes to structural budget problems,” Ballor wrote. “Sin taxes like the fast food tax are quick fixes that would have serious economic and moral consequences. Government leaders really ought to address their own appetite for spending tax dollars before they try to regulate the appetites of their constituents.”

Burger King Undeterred

Burger King Chairman Greg Brenneman said in an April 28 Wall Street Journal interview that he feels no pressure to respond to critics of the fast-food industry.

“You should be able to come to Burger King and get a healthy, low-calorie, low-fat meal. You can. Beyond that, I don’t think it’s my job to tell Americans what they should eat,” Brenneman wrote. “We might as well go back to communism.”

John W. Skorburg ([email protected]) is a visiting lecturer at the University of Illinois, Chicago and associate editor of Budget & Tax News.