ALCOHOLIC BEVERAGE TAXES, BY TYPE, FISCAL YEAR 1966 TO PRESENT 1 These increases are the result of Public Law 89-610, September 30, 1966, effective on Nov. 1, 1966. * These increases were provided in Public Law 91-106, October 31, 1969, effective on Dec. 1, 1969. 39 months. LAUNDRY AND DRY CLEANING PROPOSAL Increase the sales and use tax rate applicable to laundry and dry cleaning from 2% to 5% to yield $800,000 annually. Historical background: Public Law 91-106 enacted October 31, 1969, and effective November 1, 1969, first applied the sales and use tax to laundry and dry cleaning. The rate was 2%. Increase the sales and use tax rate applicable to non-prescription drugs from 2% to 5% to yield $600,000. Historical background: Public Law 91-106 enacted October 31, 1969, and effective November 1, 1969, first applied the sales and use tax to non-prescription drugs. The rate was 2%. Most but not all of collections from this coverage is reported by drug stores as 2% sales. Mr. CABELL. The Chair would appreciate very much the cooperation of the witnesses who have asked to be heard. I was sorry to learn that there had been no hearings on this matter before the City Council, and therefore the courtesy was extended by the Subcommittee for those who wish to make their presentations. To those of you who have statements prepared, such statements will be accepted and entered into the record. To those who would testify, I would request that the testimony be confined to those who are representing certain elements, certain groups, bona fide groups, rather than just individual opinions on the subject. That is done in the interest of time because we do need to get on to the markup as quickly as possible because of the present inequity involved in the police and firemen's salaries which are somewhat overdue. The first witness on the list is Mr. Jack Cockrell, representing the Restaurant Association of Metropolitan Washington. Mr. Cockrell, will you come forward; if you would care to submit your written statement and then recap it, or if you wish to speak extemporaneously, of course, we will be happy to hear your testimony. Mr. COCKRELL. Yes, I will have to do that. I've not had time to prepare a statement. STATEMENT OF JACK COCKRELL, EXECUTIVE VICE PRESIDENT, RESTAURANT ASSOCIATION OF METROPOLITAN WASHINGTON Mr. COCKRELL. My name is Jack Cockrell. I'm executive vice president of the Restaurant Association of Metropolitan Washington. PROPOSED SALES TAX INCREASE (5 TO 6 PERCENT) Our concern in this, primarily, is placing the restaurant industry and the hotel industry in the position of requiring more sales tax to be paid on their products than required of other industries. We are certainly not in opposition to the increase so badly needed by the police and fire departments in Washington, D.C. We support that wholeheartedly. We hope you can find some other method of financing this increase. rather than adding another 1% to our industry sales. Starting in 1942, the only problem the restaurant industry had here in making some money, making some profit, furnishing jobs, serving the public, is when something happened nationally, like a national emergency of some type. This would affect us, but nothing local affected us. Now it's just the opposite. We are seriously hurt because of local conditions here. Competition-and I'm not speaking just of D.C. restaurants only right now, because restaurants have left the District and gone into the suburbs in great numbers, and now the suburbs are overpopulated with restaurants, and they're in such a tough, competitive position, they're not doing too well either. This started in 1968. Overall, in the last four or five years nationally, the restaurant business has been increasing at a rate of about 6% annually. Here in Washington it's been almost zero level straight across the board. To give you an idea of what has happened here, what's happened to business in the District so far as restaurants are concerned, I would like to quote some figures from the records we've been keeping. We started quite some time ago, but I'll just give it to you since 1960. In the District of Columbia in 1960, there were 1683 restaurant licenses. In 1970 there were 1308. That's a drop from 1683 to 1308. In Arlington they increased from 204 to 270; in Alexandria, from 182 to 207; in Fairfax, from 245 to 600; in Montgomery County, from 333 to 480; and in Prince Georges County, from 1009 to 1120. Our problems are many here in the District, as I'm sure this Committee is aware. We have had taxes heaped upon us; it seems pretty regularly now. The Workmen's Compensation Law, Unemployment Compensation Law, the taxes and everything in the District upon a business like a restaurant, a retail business, is more than it is in Maryland and Virginia; and now the D.C. Minimum Wage Board has saddled us with a 41% increase in minimum wages. We're not in opposition to a reasonable wage increase as a minimum, but this 41% is so far beyond any guideline that's been set, it's so far beyond anything that has happened in any union contract, any wage, statutory or negotiated, that it is incredible to us that these people would have done this. I can only ask you to keep at least this sales tax, which is an increase in our prices-and we are going to have to increase our prices if this wage increase goes through-it will increase it 1% more. We're already 1% ahead of Maryland and Virginia on this, and we certainly don't want to get 2% ahead of them. If there are any questions I could answer, I would like to request that I be allowed to file a prepared statement at a later date. Mr. CABELL. With reference to the proposals of the D.C. Government for these increases in sales taxes, to what extent do they make you noncompetitive in the adjacent jurisdictions? Mr. COCKRELL. Now, Maryland and Virginia both have 4%. Maryland has a State tax, and in Virginia, I think it's 3% plus a local of 1%. making it a total of 4%. We stand at 5% now, and as I see it, they're requesting it to go to 6%. We aren't asking to be exempt from it. We're only saying that if the man has a certain amount of money to spend for services and products here in the District, that the restaurant industry not be put in a position where they have to pay more for our product. Mr. CABELL. Do you really feel that that would be a determining factor as to whether someone went outside Mr. COCKRELL. It isn't too important when you're going out to lunch and spending a dollar and a quarter, but when you're going out to dinner in the evening, and if your bill is going to be for a certain number of people anywhere from $25 to $35 or something like this, it becomes important, and particularly for the people who operate banquets. Another 1% increase in banquets when you have a $4000 or $5000 bill for the banquet, 1% does become very important. It puts you out of competition. Mr. CABELL. On the $40 check, I'm sure that there are not too many of them that would be what, 40 cents. Do you honestly Mr. COCKRELL. I think psychologically it is, probably more than actually, but I think psychologically it is. You hear people talking and they say, well, the sales tax is 6% in the District, 4% out here. I know people shop that way for groceries, and we're no different than groceries. Whenever they can save a few pennies, you know, it becomes important. Mr. MCMILLAN. I certainly agree with Mr. Cockrell. The more taxes we add on to the restaurants and the hotel rooms, you just automatically run the business over across the river into Virginia and Maryland. Take within the last year in Roslyn, alone. A lot of high-type restaurants have been opened in that community there, and I get invited quite often, so I know that you do have some competition over across the river, and we never corrected the crime situation in Washington to the extent where people do come back and use the restaurants very often in Washington at nighttime other than tourists. Tourists are about the only ones who use these restaurants at night. Is that correct? Mr. COCKRELL. Yes, sir. Mr. MCMILLAN. I certainly am interested in getting this police and firemen's bill enacted into law at the earliest possible date, but I'm not certain that we're doing the people of Washington any great benefit by adding taxes on to the restaurants and hotels. I'm not certain about that. Mr. COCKRELL. Well, we certainly sort of feel that way. As I stated before, we do feel that this is a well deserved increase for the police and firemen, and we're not trying to stand in the way of that in any way, shape or form. Mr. CABELL. Do you have any alternate solution to the question? Mr. CABELL. That's the ticklish part in this whole problem is trying to find alternate routes that would suits everybody. Mr. COCKRELL. I have an overall alternate on all of it and that it is to find some way to rebuild the city and make it a viable place where it is a real good business climate to operate in. That would be the only thing that I have to say, and I'm certainly not a city manager. I'm not an economist, but I do know that many things have happened in this city that are discouraging the retail and service trades. I understand that people are now saying there are as many people working here as there were before. This may be true, but they are in offices. They're not offering services. They're not in the retail trade in the District now, and this is different. We need that in the city to keep the people in here. You can come in here and work here in an office and go home and the District doesn't benefit whatsoever except for a little bit of payroll taxes. MINIMUM WAGE Mr. CABELL. How much differential is there between the payroll requirements that you have to pay for restaurant help as compared with adjacent jurisdictions? Mr. COCKRELL. Well, in Maryland and Virginia it's $1.60. Virginia operates under the Federal law, and the State of Maryland has seen fit to make their statute parallel to the Federal law, although they do have a state minimum wage law. It operates parallel to the Federal, and this is what we would like to see happen here in the District because the new proposal, or rather, regulation, as it is going in to affect, unless it's blocked by a court suit which our association has instituted, will be $2.25. This is 41% more for the District than it is in Maryland. The closest to it is Alaska which is, as you know, has extremely high prices and wages and everything. I think there is something like $2.10. The highest one in the continental United States is Connecticut and New York, which $1.85. Mr. MCMILLAN. I would like you to give us some little background in minimum wages the last year or several years ago before you came to Congress. Mr. Multer, who was a valuable member of this Committee from New York, was the chairman of the subcommittee which handled that bill and offered it; Congress passed the bill and sent it over to the Senate and the Senate amended and passed the entire bill and gave the Minimum Wage Board almost unlimited authority. Well, on this side, I pointed Judge Smith, who was then a member of this Committee, Mr. Nelsen, and two other good members of that Congress. When the conference came about, Mr. Abernethy and Judge Smith went to answer a rollcall in the House; I wasn't a member of the conference myself, but I understand that Mr. Morse and Mr. Multer decided on the type bill they wanted, and that is what we have to live with today. Mr. CABELL. I think probably the worst thing that could happen to the local District restaurant operators was when Virginia amended its liquor laws so they could have liquor by the drink. That has, of course, siphoned off a terrific amount of trade that normally would have stayed within the District. Mr. COCKRELL. That's part of it. Mr. CABELL. It's a little bit hard for me to understand Mr. COCKRELL. That kind of competition you can meet, though. This is the restaurant business. We're not arguing these points. We're talking about government intervention, government control, or whatever. Mr. CABELL. Where no longer do they have to come to the District to have a cocktail before dinner when they can get them within their own neighborhood. Mr. COCKRELL. Well, that's true, but this is a competitive thing, you see. If this is the reason, then the restaurants should try a restaurant in Virginia, but they shouldn't be driven out of the city because of government regulations. Mr. CABELL. Well, I'm wondering if those high rates are really accomplishing a great deal because over the past several years I have been into a number of eating places, on weekends in particular, where half the facilities would be roped off even though there were lines. of patrons waiting, and they couldn't get waitresses, waiters or busbovs or kitchen help. Mr. COCKRELL. That's true. It hasn't helped the public and it hasn't helped the restaurants and I don't think it's helped the employee. It's hurt all three areas, really. Mr. CABELL. Any questions, Mr. Link? Mr. LINK. Mr. Chairman, Mr. Cockrell, is your concern with the fact that the proposed rate would be higher than for other sales in the District? Mr. COCKRELL. That's my principal objection, yes, sir. Mr. LINK. You have been asked the question earlier as to what other means of increasing revenue you would suggest or recommend in |