There are two pieces to any public spending proposal: Where will the money come from? and Where will the money go? While they often get lumped together, especially by proponents hoping to argue that tax money isn’t really tax money — I recall, for example, supporters of Washington, D.C.’s gifting of public cash to a Nationals stadium insisting that as it would mostly come from a tax on city businesses, nobody else should complain — they can almost always be separated in subsidy discussions, and should be — there was nothing stopping D.C. from raising business taxes and spending them on something else, except now it can’t because it’s already used that to fund a private baseball stadium.
With that in mind, let’s visit Pittsburgh, which is embarking on a knock-down drag-out fight over hotel taxes, whether to raise them, and how to spend them:
- VisitPittsburgh, which is a tourism promotion nonprofit run by local Pittsburgh businesses, is proposing a 2% surcharge on hotel stays anywhere in Allegheny County, with the proceeds put in a pool for “promoting tourism.” The tax would be estimated to provide $6.5 million a year.
- The Pennsylvania state senate is proposing a “tourism improvement district” in Allegheny County that would be allowed to impose a hotel-tax surcharge, with the actual amount determined by a board of hotel operators, because that’s how taxation works, like how sales-tax hikes are determined by a board of consumers. (Ed. Note: This may not actually be how taxation works.)
- State Sen. Wayne Fontana, the board chair of the city-county Sports and Exhibition Authority, says he won’t approve the tax surcharge unless VisitPittsburgh agrees to give up a cut of the hotel-tax money it already receives for tourism promotion, and instead give it to the sports authority, which runs Pittsburgh’s money-losing convention center (this is a tautology, as pretty much all convention centers lose money) and pays for maintenance on the Pirates and Steelers stadiums and Penguins arena, currently out of ticket taxes.
- In fact, Fontana would like to see all the hotel tax money dispersed by the sports authority, which he’s portraying as bringing all tourism-and-sports-related spending under one roof, and never mind that it would just happen to be his roof.
- VisitPittsburgh President and CEO Jerad Bachar says if the sports authority gets control of the money, he’s worried that not enough of it will go to tourism promotion, so the proper solution, clearly, is to let him have the money and decide how it’s spent, since he’s an upstanding individual and not susceptible to “politics” like the authority board chair.
In a sensible world, questions would now be asked, in the halls of power and newspaper pages alike, about several things: Will spending more on hiring people to promote tourism (40% of VisitPittsburgh’s expenses are for salaries) really benefit hotels and other businesses dependent on tourism enough to be worth a 2% hotel-tax hike? Do Pittsburgh’s three sports stadiums and its convention center really need more money for maintenance and operations, and what would happen if they didn’t get it? Could a hotel tax surcharge be used for other things that might do even more to help Pittsburgh businesses and residents? This is not that sensible world. Instead, we have the public official who controls the city and county’s stadium/convention slush fund and the nonprofit CEO who controls the tourism spending slush fund fighting over who gets to direct the slush, because surely allocating it as part of the normal government spending process that is (in theory) open to public debate would be entirely crazy.
There’s almost certainly a longer article that could be written about how it came to be that fighting other cities for tourist visits became seen as one of the roles of local government — I may see if Heywood Sanders has anything to say about that, in fact. But for now, appreciate that there’s a fight going on over giving money to Pittsburgh sports venues, and it would very clearly be money that could be spent on a very specific other thing if not used for sports, and that other thing may be as big a waste of money too, but that doesn’t necessarily mean that spending it on sports is a good idea, either. Sorry if that doesn’t provide you with an easy white hat to root for, but moral ambiguity is all the rage these days, embrace it!
I was surprised that that tourism board 40% was for salaries, I always assumed most of their money went to buying adds in Midwest Magazine. That u don’t need many employees to purchase adds – learned something already today
Neil,you are such a good writer!
My area of PA also just instituted a tax like this to support the Happy Valley Adventure Bureau. Is there something specifically in Pennsylvania that promotes this type of scheme?
It’s a “free rider” issue like we learned about in first year econ. If the effort was only supported by the hotels that volunteered to do it, they’d pay all the price but all the hotels in the area would benefit. So it can’t work without a requirement/tax.
Or perhaps we could have a Hoteliers Guild of some kind, like in the middle ages?
Insofar as it brings in sales and property tax revenues and adds to the local quality of life, it’s a legitimate use of government funds and personnel up to a point. But I don’t know what that number is and I suspect it’s an area ripe for capture so that the municipality will almost always spend more than it’s worth.
I think this kind of thing (the VisitPittsburgh angle) is an important new development (to the extent it is new, at least, which I would say is not very…)
I know you are all worried about how the government spends your tax dollars. To help ease these concerns, I am prepared to volunteer to accept your tax dollars directly. I will do this for no compensation at all (other than the tax dollars, which you are paying anyway so it’s a net zero for each of you). And each of you will be relieved of the burden of wondering how the government will waste your tax dollars this year and secure in the knowledge that unlike your average anonymous and faceless government bureaucrat, I will use all my years of experience and a firm commitment to ‘general principles of goodness, fairness and justice’ in determining how best to spend your tax dollars.
Oh, and if you mark the checks as a ‘donation’, I can even give you a tax receipt!
Honestly, what more could I do for you…
St. Louis judge denies NFL, Rams and Kroenke’s move to dismiss relocation lawsuit
https://www.stltoday.com/news/local/crime-and-courts/st-louis-judge-denies-nfl-rams-and-kroenkes-move-to-dismiss-relocation-lawsuit/article_1a75645c-3d13-55ba-828b-1ab770805a3c.html
‘McGraugh’s order said the plaintiffs have cited evidence of their claim that the NFL, Rams and Kroenke “unjustly enriched” themselves from the move, which if proved at trial, “will establish that the wrongful relocation of the Rams to Los Angeles was at the expense of removing the Rams from St. Louis, which caused plaintiffs’ damages.”
‘McGraugh also declined to dismiss the fraud claims, which say the NFL, Rams and Kroenke lied to the public about the team’s plans to move to Los Angeles.’
We can only hope.
It would be fantastic if it worked out that way, Russ, but I’m not holding my breath. I suspect you aren’t either.
Seems like there’s enough wiggle room for Kroenke and the NFL to escape any significant penalty (not that they’d pay it without two decades of appeal$ anyway) out of this.
One way to “promote tourism” would be to not charge tourists an additional 2% to stay in your city. If you are charging a 14% hotel tax to those who visit your city, save all the slogans and ad campaigns, you don’t want people to visit. Actions speak louder than words. Unless you don’t have a car on a given trip, there is almost no reason to stay at a downtown hotel anywhere. You can drive 15 minutes and save a ton of money.
Not necessarily. Demand for many downtown things is often inelastic.
That’s one thing convention centers are good for. At least, good if you own big hotels.
As somebody who has been to a lot of meetings at those, I can tell you that I don’t want to have to put up with a lot of travel to save my company the money. The entire hospitality industry is built on people spending their employer’s money.
Some of the bigger meetings will have special shuttle buses to hotels not very close to the meeting, but those still won’t go out to the suburbs. They’re still downtown.
In a few places in Europe I’ve been to, the convention centers aren’t downtown. I guess because they’d have to demolish a 14th century castle or whatever to put it there. They tend to be out by the airport. Still transit accessible, but not nearly as appealing to visitors or easy to get to from the hotels. I haven’t been there, but Rome is regarded as an especially big nightmare for people trying to attend a conference.
And I don’t know what city you’re talking about where getting in and out of the downtown only takes 15 minutes. Harrisburg? Richmond? Finding a place to park in a lot of major metros will take a least 15 minutes and cost upwards of $40 a day.
Pretty much, Matt.
And we only have to look at our friends in sports franchise ownership to see this in action… they look at ticket taxes as something that is coming out of ‘their’ pocket, not the fans (because they think they could charge more for the tickets if people are willing to pay the ticket tax as well).
Well, I would say that right wing economists can’t have it both ways… if the ticket tax is effectively money taken from the sports owner, then the hotel and rental car tax by definition has to be money taken from hoteliers and car rental companies.
I’ve always found it odd that income taxes are seen as regressive and job killing, yet surtaxes like the ones billionaire sports owners propose (or exorbitant credit card fees for that matter) are seen as “money falling from heaven” and not at all regressive or job killing.