As the spring break season in Panama City, Florida ends and the summer vacation season begins, a new tourism development tax approved by voters in November 2014 is using vacationers as a fresh revenue stream.
Panama City collected $151,000 in new revenue by taxing hotel occupancy over the first four months of the year. City lawmakers are expecting the tax to generate a total of $1.2 million by the end of year.
Sending Tourists Elsewhere
James Madison Institute Vice President of Policy Sal Nuzzo says the city’s “bed tax” will cause tourism money, and the tourists themselves, to go elsewhere.
“Interestingly enough, Panama City is trying to fight back against the spring break influx, and it’s kind of pitted different factions of the city against each other, depending on if you’re in favor of whatever the revenue is from all the kids coming in, or if you think it’s not worth the cost,” Nuzzo said.
As taxes make Panama City hotels more expensive, other destinations become more attractive for visitors, Nuzzo says.
“The further west on the coast you go, the clearer the water gets, and the more advantageous and appealing the areas begin to become, so you’ve got all of that in Walton, Santa Rosa, and Escambia Counties,” Nuzzo said. “This is going to continue to create more overflow into these areas, at the expense of Panama City tourism.”
‘Hurts Downstream Businesses’
Americans for Tax Reform State Government Affairs Manager Paul Blair says bed taxes are counterproductive.
“Higher hotel taxes reduce hotel business, which hurts downstream businesses, such as restaurants and convenience stores, whose success depends on hotel traffic,” Blair said. “Given the massive benefit tourism provides to places in Florida like Panama City, it’s astounding the city would want to discourage people from visiting with tax hikes like this.”
Blair says tourist destinations like Panama City should encourage tourists to visit by treating everybody equitably.
“If Panama City really wanted to attract new businesses and tourists, it would welcome them with non-distorted tax codes and it would have lower, broad-based tax rates that apply equally to everyone,” said Blair. “No goofy taxpayer-funded ad campaigns or other efforts will be as effective.”
‘Simply Filling City Coffers’
Blair says Panama City’s bed tax is just another example of a government cash-grab.
“Lawmakers love when they can extract money from consumers, whether they’re tourists or local residents, [with] no strings attached,” Blair said. “They can spend it on whatever they want.
“The mayor hasn’t even tried to hide the fact this money is simply filling city coffers, to use in any way they want and to help them spend more and more money at the expense of a taxpayer-friendly local economy.”
Elizabeth BeShears ([email protected]) writes from Birmingham, Alabama.
Seul Ki Lee, “Revisiting the Impact of Bed Tax with Spatial Panel Approach,” International Journal of Hospitality Management: https://heartland.org/policy-documents/revisiting-impact-bed-tax-spatial-panel-approach/