Pennsylvania Gov. Tom Wolf (D) approved a bill allowing counties to increase hotel tax rates beyond the current 3 percent cap.
County governments can now tax up to 5 percent of the cost of hotel rooms.
Hotel occupancy taxes are excise taxes added to the cost of renting a room or space in a hotel.
Government tourism agency officials in York County, one of the governments expecting to benefit from the tax hike, which was signed into law in April, expect to receive more than $1 million a year in additional revenue, which county officials say will be used to subsidize government-sponsored tourism programs.
Bob Dick, a policy analyst with the Commonwealth Foundation, says using taxpayer money to promote private businesses may sound good in theory, but it doesn’t work in practice.
“In theory, the additional spending is supposed to attract more people to the county,” Dick said. “Yet, there isn’t much scholarly evidence to suggest this is the most effective way to promote tourism. Hotels may pass a portion or all of the tax onto guests, which essentially means York County is taxing tourists in order to promote tourism. This may prove counterproductive and discourage people from visiting the county. The new tax hike may also crowd out private tourism promotion.”
‘Better Alternative’ Suggested
Dick says using economic reforms to make it more attractive to do business in the state is more effective than creating taxpayer-funded handouts.
“Improving the business climate is a better alternative than raising taxes,” Dick said. “York County needs to create and sustain a thriving restaurant and entertainment industry to attract tourists. The best way to accomplish this is by removing undue burdens on entrepreneurs capable of making York County a great place to visit.
“Ultimately, the job of promoting York businesses and venues should be left to the private sector,” Dick said. “Hotel employees and tourists should not have to bear the burden of funding government promotion efforts.”
‘Almost Crony Capitalism’
Clark Packard, a government affairs manager at the National Taxpayers Union, says tourism taxes are an example of government playing favorites with businesses.
“It essentially boils down to almost crony capitalism,” Packard said. “By and large, this kind of legislation is not successful. It’s almost a Field of Dreams idea that, ‘If you build it, they will come.’ The interesting thing is the way most businesses and organizations work, they meet demand. They don’t create supply to hopefully create some demand that may or may not exist.”
Danedri Herbert ([email protected]) writes from Kansas City, Kansas.