Voters in Little Rock, Arkansas have approved using revenue from a new tourism tax to fund capital improvements to local attractions.
In February, 7,990 residents, less than 7 percent of the city’s 121,455 registered voters, cast ballots approving the diversion of $37.5 million in new revenue from taxes approved in December 2015, to the Arkansas Arts Center and a local park.
Including state taxes, the City of Little Rock now taxes visitors’ hotel and motel stays at a combined rate of 15 percent, exceeding the tax rates charged for hotels in New York City and other major cities.
David Ray, director of the Arkansas chapter of Americans for Prosperity, says people visiting Little Rock are now paying one of the highest bed taxes in the nation.
“According to a Consumer Reports article from 2014, this puts our tax higher than many of America’s large cities, such as New York, Philadelphia, Phoenix, Dallas, and San Diego,” Ray said.
Changing Travel Plans
“Total occupancy taxes average about 12.7 percent, so the increase makes the hotel tax in Little Rock among the more expensive nationwide,” said Jared Walczak, a policy analyst for the Tax Foundation.
Walczak says tourists change their travel plans in response to taxes on accommodations.
“In the past, localities have often seen little downside in levying high taxes on hotels, as much of the burden is exported to nonresidents, and the belief was that few people would change their plans based on taxes that few would even be aware of until they checked in,” Walczak said.
“But that’s not how we book hotels these days,” Walczak said. “We go online and comparison shop, and while we may not pay attention to how much of the price is attributable to state and local taxes, we’re definitely looking for the best deal. If hotel taxes are lower a mile down the road, then at some point hotels that wish to remain competitive may have to adjust their prices.”
Michael Bates ([email protected]) writes from Tulsa, Oklahoma.
