Taxing Those Tourists

Increasing taxes on hotel rooms is a tempting way for officials to spread the local tax burden to people who live somewhere else, but the tactic ultimately backfires, according to a study released today in Los Angeles by the American Hotel & Motel Assn.

When the so-called bed tax rises, any revenue gain is more than offset by revenue and taxes lost because of reduced hotel occupancy and visitor spending, according to the report prepared by the American Economics Group, a Washington-based consulting firm, for the American Hotel Foundation, an affiliate of the association. The report is scheduled to be presented today at a hotel conference sponsored by UCLA Extension.

“We’re hoping to bring the message to legislators that you can’t export the tax burden” by raising taxes on hotel rooms, said Charles W. de Seve, president of the American Economics Group. “You’ve got your own people who are losing jobs and losing taxes.”

The report found that increasing the average tax on hotel and motel rooms by 2% would cause a 5.1% reduction in room sales and visitor spending per year.

The higher bed tax would bring an additional $769.5 million in taxes. But the reduction in hotel occupancy and visitor spending would spill into every sector of the economy, cutting state and local taxes by $989.2 million and costing 661,335 jobs, the study found.

The bed tax in Los Angeles and Orange counties is high, but it doesn’t come close to the survey’s leader, New York.

The 14% bed tax in Los Angeles translates into an average tax of $11.52 on an average room rate of $82.30. In the Anaheim-Santa Ana area, the 15% bed tax means an average tax of $11.42 on an average room rate of $76.14.

New York’s bed tax of $14.3% means that $24.07 in taxes is collected on an average room rate of $168.33.

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Nancy Rivera Brooks can be reached via e-mail at nancy.rivera.brooks@latimes.com or by fax at (213) 237-7837.