Saturday, July 23, 2011

Seattle Tourism Tax

Seattle has decided to impose a new hotel room tax of $2.00 per night on visitors to the city to replace $2 million that was cut from the Washington State budget for tourist promotions.

Seattle already has the third highest hotel room tax in the nation, right behind New York and Chicago.

The current hotel room tax rate is 15.6%.  The tax on rental cars in Seattle is 18.6%.

So why are these rates NEARLY DOUBLE the current Seattle 9.5% sales tax rate, the one city residents pay every day when they buy things?

It is called "taxation without representation."  Our Founding Fathers in 1776 talked a great deal about it.  Perhaps the Seattle City Council could break out a copy of the Federalist Papers and learn something new.  As James Otis, a good friend of Thomas Paine during the American Revolution, reminded us, "Taxation without representation is tyranny."

Well, not in Seattle I guess.

Taxing visitors to a city is easy for politicians.  People who do not live in Seattle cannot vote in local races so there is no chance of retaliation at the polls for the excessive taxes.  Such a policy might make sense in a childlike way but this unfairness just invites tax retaliation from other jurisdictions who will tax Seattle residents when they visit other places.

The idea of encouraging new tourists by increasing the taxes and costs on their visits is as dumb as it sounds.  If a $2 per night hotel tax will bring in new tourists, why not raise the tax to $20 per night and bring in ten times as many visitors?

If you visit Seattle and stay in a $200 per night hotel room for five days and have a $50 per day rental car with you as well you pay more than $200 in taxes to the city of Seattle alone during your stay.

And of course nearly 10% on everything else you buy too.  Plus another 10% a day for the parking spot for that rental car.

With so much financial encouragement like this, I'm sure a tidal wave of new tourists can't wait to visit the city.  Who doesn't like being taxed at nearly 20% rates?

The idea of promoting PRIVATE places like hotels and tourist attractions with PUBLIC money is deeply offensive.  If the downtown hotels, amusement parks, and sightseeing destinations want to promote their locations, let them pay for it.  These corporations and LLCs will reap the financial rewards.  Why ask tourists from Omaha, Peoria, Spokane, and Detroit to pay their public relations and advertising budgets?

Even the Space Needle is Seattle is privately owned.  Why should any government spend money to get tourists to buy tickets there?

Tourism is falling in Seattle for one reason and it is not for the lack of taxes or glossy visitor brochures.  Crime is rising in the downtown tourist core of the city which is quickly becoming one large encampment for vagrants and transients.  Here is what the professional meeting planners who visit Seattle have to say about the problem.

The effect of all these sales taxes on hotel valuations and cap rates will be discussed in a future article.  These real estate investors are the real losers here.