SCOTTSDALE AND TEMPE DON'T NEED HIGHER HOTEL TAXES

February 12, 2010

On March 9, Scottsdale and Tempe voters will decide whether to approve a two percentage point increase in their cities' tax on hotel room rentals.  In both cities, hotel associations seem united in support of the measures.  The Surprise city council already approved its own bed tax increase earlier this month.  It, too, was supported by the city's hotel association, says Byron Schlomach, an economist and the director of the Center for Economic Prosperity at the Goldwater Institute. 

Why would some hotels support taxing themselves?  According to Shlomach: 

  • Many hoteliers hope to see the increased tax revenue used to lure more tourism to the state; that's a long shot because, over time, travelers will find more affordable places to visit.
  • The tax increase contemplated by Scottsdale and Tempe will make their hotel tax higher than those of Las Vegas, Palm Beach and San Diego.
  • It's small comfort to know that large Texas cities have higher hotel taxes when that state has no income tax.
  • In the long run, this tax strategy will strangle the goose that laid the tourism golden egg by making Arizona cities less competitive. 

Only half of the new taxes will definitely go to tourism promotion.  The rest could fund transit, public art, golf venues and in Scottsdale, an equestrian center.  Both Scottsdale and Tempe are ignoring the common sense option of scaling back or selling off these luxury activities to bring government spending in line with revenue, avoiding any new taxes, says Schlomach. 

To revive tourism at a time when people are weighing their vacation options carefully, cities should consider reducing taxes on lodging altogether.  That'll send an inviting message to travelers and conventioneers that Scottsdale and Tempe welcome their business, and Arizona is ready to compete for visitor dollars, says Schlomach. 

Source: Byron Schlomach, "Scottsdale and Tempe don't need higher hotel taxes," Goldwater Institute, February 11, 2010. 

 

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