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.
Why would some hotels support taxing themselves? Many hoteliers hope to see the increased tax revenue used to lure more tourism to the state. That's a long shot. 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.
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.
Dr. Byron Schlomach is an economist and the director of the Center for Economic Prosperity at the Goldwater Institute.
Learn More:
Scottsdale Pro-Bed Tax Campaign: See the link for "What are 'tourism-related capital projects' and why are they important?"
Arizona Republic: Scottsdale bed-tax backers begin campaign
4Hoteliers: Luxury Hotels & Price Elasticity
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