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LANSING, MICHIGAN, USA; LONDON, UK- The World Travel & Tourism
Council Taxation Policy Taskforce voted unanimously to oppose a
proposal put forth by the Grand Traverse County Board of
Commissioners that would extend the coverage of Michigan’s
Public Act 263.
During a
conference call held on October 29, Taskforce members criticized
the proposal for placing the tax burden exclusively on hotel
operators, who would be required to collect up to a five percent
tax on hotel guests to support local government-related
services. Taskforce members were in agreement that the proposal
appears to be an attempt by politicians to increase local tax
revenues without alienating local voters.
Taskforce
Chairman, Dr. Richard Kelley, Chairman of Outrigger Enterprises
said, “The Taskforce, with support from the World Travel &
Tourism Tax Policy Center at Michigan State University, worked
very hard to establish the facts of this tax proposal and
evaluate its compliance to the Principles of Intelligent
Taxation developed by London School of Economics (LSE) in
London, UK. The Traverse County proposal failed to satisfy the
basic criteria necessary for Taskforce approval.”
The
Taskforce also questioned the Grand Traverse Board of
Commissioner’s assertion that tourists do not pay for basic
government services such as road repair and police and fire
protection while visiting a destination. While it may be true
that tourists do not directly pay for these services, they do
generate sales tax revenue, which is redistributed to the county
by Michigan’s revenue sharing system. Likewise, tourism
businesses such as hotels pay for county services via property
taxes. Therefore, imposing another tax specifically aimed at
tourists and the lodging industry amounts to inequitable
taxation.
Dr. Donald
F. Holecek, Director of the World Travel & Tourism Tax Policy
Center said, “The major hurdle that the proposal could not
overcome was the lack of specificity in the usage of revenue.
The proposal effectively opens the gates for County
Commissioners throughout Michigan to use Tourism as a means to
fund their pet projects and avoid voter critique.”
Public Act
263 of 1974 permits counties meeting specified population
requirements to establish a hotel tax at a rate of up to five
percent, the revenues from which accrue in the county treasury.
County governments are then free to use the revenues for any
project or service they consider “tourism-related”.
At the
outset, PA 263 appeared to be an effective stimulus for tourism
growth. Over the years, however, it has produced mixed
results. Because the legislation does not specifically define
how these revenues are to be used, local governments in PA
263-eligible counties have demonstrated a tendency to fund a
wide range of projects and services, many of which were of
questionable value to the local tourism industry. Therefore the
Taskforce agreed that extending what is in many respects a
failed tax strategy to other Michigan counties would not be a
recommended course of action. Beyond the unanimous rejection of
the Traverse County proposal, the Taskforce also recommended the
re-examination of PA 263 to determine if a new Tourism tax
scheme might better serve Michigan visitors and state residents.
Currently,
only those counties with a city of at least 40,000 are eligible
to impose an accommodations tax under PA 263. The proposal
would eliminate the population requirement, allowing any of
Michigan’s 83 counties the ability to impose the tax. The
proposal would also broaden the allowable uses of the revenue to
include government services such as road maintenance, police
protection, and county park maintenance.
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