By Tom Giovanetti
In the mad dash to complete this Texas legislative session, both good and bad ideas will die, and good and bad ideas will become law. One of my greatest fears is that, in a last-minute scramble for revenue, bad ideas previously thought dead will return, zombiefied, with no time left for thoughtful analysis.
One such bad idea is a new tax on travel services, including online services like Priceline, Orbitz, Expedia, Travelocity, and many others. Surprising, in a budget surplus environment, this new tax passed the Republican-controlled House as HB 3579, but has seen no action in the Senate. Most House Republicans have committed in one way or another to not raise taxes, but this seems to be a session characterized by commitments broken and principles betrayed.
Sponsors claimed that the purpose of the tax was to provide revenue for the promotion of Texas tourism, but not only did HB 3579 not include that restriction, the idea makes no sense. Why claim you're trying to draw more tourists to Texas when you're punishing them with increased costs for visiting Texas? Isn't it more hospitable to not stick visitors with discriminatory taxes?
This is one of the most pernicious things states do with taxes, levy them against people who don't get to cast a vote in the state. Out-of-state travelers are easy chickens to be plucked, victims of taxation without representation. But by ratcheting up taxes on travelers, Texas also risks becoming a costlier location for conventions and other valuable tourism. And leisure travelers in particular are hyper-sensitive to price increases. Priceline has found that when a room rate increases by 1 percent, bookings drop by 2 percent.
Defenders of this new tax argue that it's "closing a loophole" by extending the state hotel occupancy tax to include the service fees that travel agents charge their clients. But this is not a loophole. If you believe in occupancy taxes at all, the existing occupancy tax is only properly applied to the price of the room, not to the fees agreed to between the travel agent and its clients.
Because so much travel these days is arranged online, HB 3579 is really an attempt to tax internet travel service providers. But therein lies the risk: If Texas levies a tax on those online providers, they will have an incentive to feature and promote travel to other destinations where they do not face the tax burden.
But HB 3579 would hit all travel agents, not just online services. That means it would hit small, independent travel agencies as well.
What that means is that the opportunity cost of such a new tax could be significant. Tourism is well understood to involve economic multipliers. Travelers patronize restaurants, entertainment venues, taxis and shared ride services. All of these businesses stand to lose some marginal amount of business if the overall cost of travel is unnecessarily increased by an unnecessary tax.
With a $10 billion surplus, there is simply no need in Texas for a net tax increase of any kind. Even if there were, discriminatory taxes on travel and tourism would be among the most counterproductive taxes imaginable. Let's hope HB 3579 stays dead and doesn't stalk the halls of the Texas State Capitol in the waning days of the legislative session.
Tom Giovanetti is president of the Institute for Policy Innovation in Irving. He wrote this column for The Dallas Morning News