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Relating to the use of municipal hotel occupancy tax revenue in certain municipalities.
No fiscal implication to the State is anticipated.
Current law allows certain municipalities to use revenue derived from the municipal hotel occupancy tax for enhancing hotel activity and encouraging tourism. SB 320 provides that this law applies to a municipality with a population of not more than 15,000, rather than 5,000, that is located in a county through which the Frio River flows and an interstate highway crosses, and that has a population of at least 15,000.
Texas Action recommends opposing SB 320 because it offends principles of limited government and free markets by expanding the use of the hotel occupancy tax in this state. First, funding projects through the hotel and occupancy tax (HOT) offers little transparency—lawmakers have no way to verify whether the disincentive caused by the high cost of the HOT is offset by gains elsewhere in the tourism industry. Second, the tourism and travel industry, like any other private industry, should not rely on taxpayer subsidies in order to flourish. It is emphatically not within the proper role of government to use taxation in this manner.
We recommend following the Texas model and reducing or eliminating the HOT altogether. The best economic model is one in which regulation is light, sensible, and transparent. As always, please do not hesitate to contact us if you have any questions or would like to discuss further.