Taxing Fast Food

Detroit Mayor Kwame Kilpatrick has floated a budget that includes a proposal for a 2 percent tax to be levied only on sales at fast-food restaurants. In his budget statement, the Mayor said:

This budget also assumes that we will adopt two new sources of revenue in Detroit, a fast food tax and a property transfer tax. Both will require approval of city voters. The fast food tax would apply only to fast food restaurants. We're asking for a 2 percent tax. That means if a Happy Meal costs $2.99, the total cost will be $3.05, with the six cents coming to the City. If you buy a medium fry for $1.05, the total cost will be $1.07, with the two cents going to the city. It's a small amount for the individual customer, but it adds up to a meaningful amount to preserve essential city services.

The property transfer tax will apply to the sale of property in the city and will be assessed as a part of the closing costs.

Together, the two proposals will generate roughly $15 million in the coming fiscal year. Detroit is facing a $300 million dollar revenue shortfall. The proposals require action by city voters and the state legislature.

Nationally, consumers already are charged an average rate of 6 percent in restaurant taxes, according to the National Restaurant Association. The additional amount would be on top of the restaurant tax.

It is generally accepted that fast food contributes to obesity. It’s also generally accepted that obesity leads to a number of chronic diseases (notably diabetes) that tax the nation’s medical infrastructure.

This is a creative manner to raise revenue for the city of Detroit and warrants debate. Although TYL would like to have more information on the specifics of the proposal, including how the Mayor defines fast food.