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August 14, 2012

Taken for a Ride on Occupancy Taxes

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It's not surprising that Saratoga County is attempting to inappropriately extend existing occupancy taxes beyond the actual price paid for the hotel room, under some discredited theory that the County is somehow getting stiffed by online travel companies.

After all, for the last several years a band of consultants has been roving the country peddling this very argument, promising cash-hungry state and local revenue authorities piles of new spending money, at virtually no political cost, since the expanded taxes would apply to "outsiders."

This didn't start with Saratoga County, of course. No, the consultants started with the bigger fish, at the state level in Texas, Florida, Virginia, Pennsylvania, and several other states. But in every case, the states were persuaded by either legal or economic arguments against what would essentially be a new tax on travel and tourism.

Having failed with those states, these consultants have begun peddling their wares at the local level, which is how Saratoga County showed up on their radar. They've widened their pool of potential marks but have not improved their failure rate. Over and over cities and counties have realized that extending the occupancy tax to travel services is inappropriate and counterproductive.

Those few that tried have consistently lost in the courts. An attempt by New York City was found to be unconstitutional in 2011. In fact, no court has ever found that online travel companies are not remitting the full and proper amount of occupancy taxes to localities.

The arguments against this expanded tax are clear. For one thing, occupancy taxes should apply to occupancy--not to someone's unfounded idea of what a hotel room should cost, as opposed to what it actually did cost.

Further, increasing taxes on travel and tourism is a terrible idea everywhere, but especially in an area that benefits so profoundly from tourism. At the end of the day, if implemented, the proposed extension of the occupancy tax will raise the cost of visiting Saratoga County for visitors who already have plenty of choices for their discretionary travel.

And because federal law bans discriminatory taxes applied only to services delivered over the Internet, the expanded occupancy taxes will affect not only online providers, but also traditional brick and mortar providers of travel services as well.

Finally, the answer to government budget problems can't always be yet another new tax. Families in Saratoga County have had to rein in their spending in order to deal with the realities of the economy. It's not inappropriate to ask government to do the same.

Saratoga County is being taken for a ride. Instead of extending the occupancy tax and making it more expensive to visit, the County should recognize tourism providers as partners, and continue to work together to promote the beauty and history of Saratoga to potential visitors around the world.

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