by Barry A. Liebling
The Covid-19 pandemic of 2020 has been devastating to restaurants in New York City. Indoor dining has been forbidden by law, and eateries have to sell “food-to-go” in order to bring in revenue. In the spring and summer months many restaurants set up tables just outside of their establishments to accommodate customers who are eager for the restaurant dining experience. Of course outdoor dining has its limitations, and as the fall weather becomes cooler fewer people will be willing to picnic.
Recently the state government has given restaurants permission to offer indoor dining – but only using 25% of their capacity. This restriction makes it very difficult for eating establishments to realize profits. Savvy restauranteurs are frustrated with this rule and argue that they could accommodate a much larger number of customers indoors safely.
On cue, the pols at the New York City Council have drafted legislation that they claim will “rescue” small restaurants. And, as is characteristic of government meddling in general, the new law will do some harm but no good. https://www.wsj.com/articles/new-york-city-council-oks-restaurant-surcharge-during-pandemic-11600289009?mod=hp_lista_pos4
For more than forty years the City of New York has had a law that forbids restaurants from adding surcharge fees on customers’ bills. Consider the wisdom of the old law. In a free market some restaurants will enact surcharges and some will not. Customers will either tolerate or shun the extra fees. I would stay away from restaurants with surcharges, but I have no objection to other people participating in this expensive practice.
Rather than repealing the old law entirely, the City Council is fiddling with a surcharge gimmick. It allows and encourages small restaurants to add a “10% Covid-19 Relief Fee” to the checks of customers who dine inside. The fee cannot be levied on “food-to-go.” And, according to its authors, the 10% fee can only be used for 90 days from the time indoor dining resumes.
I am a long-time Manhattan resident and recognize that the City Council’s scheme is entirely consistent with my expectations – foolish and counterproductive.
New York restaurants are free to rewrite their menus at will. Since the pandemic hit I have seen dramatic increases in the cost of obtaining restaurant food. Customers can take it or leave it. Some restaurants have been successful at keeping their patrons even as they charged more for their cuisine, and others have priced themselves out of business.
So what does a government-approved 10% surcharge accomplish? It provides business owners with a phoney excuse for raising their prices. “It is not me, it is the City Government that is responsible for the new fee,” some restauranteurs will say. Of course, the claim is ridiculous since establishments are not required to charge the tariff. Everyone involved knows that the 10% surcharge is an action that can only reduce the number of people who dine indoors.
Some patrons are not price sensitive at all. They are not concerned with the size of their check and will eat in restaurants with or without the new fee. But diners (probably a large proportion) who budget their money will take the fee into account. Perhaps they will go to restaurants less often. And notice that the surcharge cannot be used for “food-to-go.” What effect do you suppose it will have on the decision to eat inside?
I am in the habit of monitoring how much I spend on nearly everything. I do not want my restaurant bill to increase. Still, I might accept higher prices if the establishment acts in a straightforward, honest manner. But using the government-created surcharge as a fake rationale is a sure way to deter me from being a customer.
Consider the mindset of the City Council members who are responsible for writing and passing the surcharge legislation. They claim they are interested in helping small restaurants and believe their new law will – on balance – benefit these businesses. The laws of supply and demand are abhorrent to these career pols. Deep down they know that raising the price of dining will lower its incidence. But – in defiance to reality – they insist their wishes will override the sensible decisions of people who go to restaurants.
If the City Council members were serious about helping small restaurants what could they do? Instead of raising the price of eating out, they could dramatically lower it. New York City sales tax on goods and services is 8.875%. What would happen if taxes on restaurant food were eliminated? Diners would have a tangible incentive to go to restaurants. Many people would eat out more frequently. And this reasonable scenario is nearly impossible in New York. The City Council is eager to be generous with money from restaurant customers. But to a government junkie taxes are sacred and reducing them is blasphemy.
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