Despite persistent affordability concerns, the Kendall County Commissioners’ Court is once again flirting with the idea of creating a controversial new tax to benefit select businesses at the expense of virtually everyone else.
The tax in question is the hotel occupancy tax (HOT) and, if ultimately approved, officials would place another financial strain on any person who pays for a hotel room or other lodging, including inns, motels, and short-term rentals. The cost could be significant too.
According to one recent report presented to the Court (see pgs. 133 – 173), imposing a new HOT at a rate between 5% – 7% could squeeze visitors for an extra $600,000 to $700,000 per year. With the state HOT rate already set at 6%, an extra 5% – 7% levy would push the total tax rate well into the double-digits thereby hiking the cost of staying in the county’s unincorporated parts, like Comfort, and making it less likely that cost-conscious tourists stay overnight.
Supporters of the tax argue that it is a way to fund marketing, signage, and event promotion. However, many small business operators contend that high taxes are the problem, not the solution.
For instance, Lance Kyle, representing Cascade Caverns during the June 9 meeting for the Court, pleaded that: “The real problem is not a lack of advertising or promotion. It is rising property taxes, labor rates, interest rates, rents, inflation, and certain structural issues. Relying on tax increases to generate revenue as a short-term solution does not address underlying economic challenges or promote sustainable growth” (from the 1:16:55 mark). Kyle wasn’t alone in offering this type of criticism either.
In fact, public attitudes toward the HOT proposal seemed generally sour. Many people, both at the public meeting and online, appeared to dislike the idea that government might become heavily invested in boosting tourism instead of being focused on delivering core services. Still others appeared frustrated that the government may use the Tax Code to favor select businesses at the expense of others, which could be doubly sour should tourism not improve.
Another argument against the HOT is that not having it makes the county and its places more competitive than those of the surrounding area. For example, the neighboring city of Kerrville levies a 7% local HOT, making accommodations in Kendall County more affordable. With the implementation of the HOT, hotels in Kendall County lose that competitive advantage. The tax contradicts itself — by increasing lodging costs, tourists may simply choose not to visit, and the HOT would not generate any revenue.
Not only does this increase in costs negatively impact consumers, but it also hurts lodging properties. In the meeting, representatives from major hotels and resorts spoke out about their firm opposition to a local HOT. Kevin Welborn, the managing director at Joshua Creek Ranch, told the court that “This tax will significantly increase the lodging charges that our guests will pay. When our clients see the increased cost of their lodging expenses, they attribute that increase to Joshua Creek Ranch, not to Kendall County, whose new tax does not benefit them or Joshua Creek Ranch, since it will be spent primarily to promote tourism in Comfort” (from the 1:16:55 mark).
Ultimately, there are solutions to boosting tourism that don’t involve new taxes or sweetheart deals. And they center on the free market.
Private enterprise—unshackled from government’s endless rules and regulations and untouched by excessive taxation—is the real answer. When local business owners, investors, donors and other interested parties are free to collaborate absent the burden of government, then these stakeholders can fundraise and market independently. Communities can solve their problems through local coordination, not through government action that hinges on an unpopular new tax and unrealistic expectations.
There’s a right way and a wrong way to go about enticing tourists to visit Kendall County communities. To do it the right way, officials should (drastically!) lower taxes reduce the regulatory burden heaped upon market actors—and then focus on the basics of government. Do these things, and watch as tourism grows and develops naturally and sustainably.