by Michael Lowrey
JLF Chairman John Hood on Charlotte taxes aimed at extracting money from visitors:
Still another useful tool is transparency. I don’t just mean requiring government meetings to be open, providing public records on request, and putting information such as government budgets and spending ledgers online. I also mean making public policies easy to follow and understand.
When it comes to tax policy, this principle requires governments to employ revenue sources that average citizens can see, track, and understand. That’s an argument for taxes that generate annual bills, such as taxes on real property. There’s a reason the property tax is difficult to raise. People can clearly see how much it costs them.
Unfortunately, many localities have increasingly come to rely on taxes that are hidden in service contracts or bills, especially when visitors comprise a significant share of those who will pay them. A Texas-based think tank, the National Center for Policy Analysis, recently published a nationwide study of hotel occupancy taxes, car rental taxes, and airline taxes. Would it surprise you to learn that North Carolina’s largest city, Charlotte, had the 9th-highest tax burden on travelers among major cities in the United States? That’s what the NCPA study found.
Although policymakers often assume they can get away with taxing visitors heavily without major consequences, there’s good evidence to the contrary. The more you tax your visitors, the less money they have to purchase goods and services while they’re in your community. Moreover, it’s a fallacy to argue that these taxes only hit visitors. Lots of local households and businesses rent cars, for example, or pay hotel bills for relatives, friends, or business associates.
Generally applied property and sales tax are sufficient to capture revenue from those who visit, shop, do business, or stay overnight in a community. Extra levies are abusive. Sure, politicians feel they can get away with them because so many of the taxpayers aren’t local and can’t vote against them. But that doesn’t make them good policy.