Monday, April 05, 2010

In A Time When Communities Need More Revenue… It Is Time To Dramatically Lower The Room And Car Rental Taxes!

Tourism is major economic development for communities but the prevalent taxes levied on these consumers are archaic, inequitable and low yield.

You read correctly. If cities and counties want to get some serious revenue from tourism, it is time to dramatically reduce the ubiquitous tax rates levied on individual customers during check out on the rates paid for guest rooms in commercial lodging establishments and on car rentals.dead-end-sign

Extremely small proportions of travelers overall utilize commercial lodging or car rentals so double digit tax rates on just these two areas collect far, far less than a 1% or less tax shouldered by every type of visitor and equitably across all visitor expenditures would generate much, much, more revenue and it would be much more equitable as well.

First the replacement tax would need to reach travelers as they pay for gasoline or transportation, dining, shopping and entertainment admissions etc.

The trick is how to avoid residents who pay for those services so it may not be a sales tax and instead a gross receipts tax calibrated to the proportion of revenue each type of business receives from visitors.

Yes, that is possible to determine for each community through tools like ImPlan. It would also be possible to vary rates within business type, say based on whether the car rentals are for travelers are accident insurance claims or individual travelers vs. guest rooms purchased in bulk by major corporations etc.

This could be done as “tourism” improvement districts based on a type of business vs. just geography. The rationale can be not only to self fund community marketing and promotion but to fund infrastructure and services used by all travelers.

The options are endless but one thing is for sure. Continuing to go down the road of levying taxes on a very few travelers is, well a dead end.

Of course, this change in the status quo would mean an end to the stupid comments in so many Chamber of Commerce board rooms where some types of businesses, e.g. lawyers and TV stations, are so willing to throw visitor related businesses under the bus for higher taxes because “we” don’t pay them.a

An end to the status quo would also be an end to whining by sports teams, eager to tax lodging or car rentals to pay for facilities but virtually apoplectic over admissions taxes and of course restaurant associations who say nothing when taxes are increased on hotels but threaten seppuku over taxes on prepared food while at the same time claiming a third of revenue is from visitors.


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