Room tax bill would hurt Wisconsin communities big and small

It's hard to single out just one odious measure tucked tucked deep into one of the many omnibus packages that the Joint Finance Committee have recently thrown together during deliberations in the state budget, but I wanted to go into one that wasn't even part of Gov Walker's original bill. It’s a giveaway to an organization that represents the state’s hoteliers that could cost local communities millions of dollars in tax revenue, and Wisconsin Public Radio had a good rundown on this proposal yesterday.

The change, which was approved by the Joint Finance Committee last month, would mean communities would have to turn over 70 percent of room taxes they collect to local tourism. Bayfield Mayor Larry MacDonald said his city keeps 48 percent of the tax now, and that the proposed change would result in services getting cut.

"We will be forced by the Wisconsin Hotel and Lodging Association to damage our tourism economy because we will not have as many police officers, garbage cans, parks — you name it," said MacDonald….

Wisconsin Hotel and Lodging Association President and CEO Trisha Pugal, however, said the room tax was always intended to benefit tourism: "That’s the only reason an industry like the lodging industry would accept a tax just on their customers," she said.

Pugal said that around 60 out of 270 communities that use the tax currently keep more than the 30 percent share that would be required under the change. She said the shift will benefit local tourism by funding promotion and development, bringing the state more sales tax dollars.

Of course, Ms. Pugal doesn’t seem to understand that people go to Bayfield because of its Lake Superior scenery and community amenities, and not just because they saw an ad from the local "Visit Our Town" organization. If the town’s streets turn to crap and its open spaces get run down, all the tourist industry propaganda in the world won’t change people’s minds, and the local economy will dry up.

The Legislative Fiscal Bureau has a good rundown on locally-oriented taxes, and what they can be used for. There’s what room taxes can be used for as of this time.

Prior to June, 1994, municipalities were not restricted as to the tax rate or use of room tax collections. However, 1993 Wisconsin Act 467 imposed a maximum tax rate of 8% and required that at least 70% of any new room taxes be used for tourism promotion and development.

Tourism promotion and development was de-fined under 2005 Wisconsin Act 135 to mean any of the following: (a) marketing projects, including advertising media buys, creation and distribution of printed or electronic promotional tourist materials, or efforts to recruit conventions, sporting events, or motorcoach groups; (b) transient tourist informational services; or (c) a tangible municipal development, including a convention center. The allowable tourism promotion and development activities must be significantly used by transient tourists and reasonably likely to generate paid overnight stays at more than one establishment on which the room tax is imposed, that are owned by different persons. If a municipality has only one such establishment, the tourism development and promotion activity must be reasonably likely to generate paid overnight stays in that establishment.

This bill would remove that grandfather clause, and force 70% of room tax revenues to go to “tourism promotion and development” organizations.

And it’s not just small tourist towns like Bayfield that could feel the hit, as Madison Mayor Paul Soglin has indicated this change in law would cost the City of Madison $2 million to $3 million dollars that are currently used for services such as snow plowing and street maintenance. This makes sense, as tourists use those streets and amenities too, so it is logical that the room taxes should contribute toward the items that they use (remember, almost all cities and villages in Wisconsin do not have a local sales tax, those are on the county level).

It’s also senseless to harm communities that bring in visitors and boost the state’s economy. Dane County draws the second-most tourism dollars out of any county in the state, with Milwaukee County being Number 1. Yet between this bill, and prior ones that gives Milwaukee’s room tax revenue to the Wisconsin Center District instead of the City, neither of the main cities in those counties can get the full fiscal benefit of attracting those visitors. This makes it more likely that they will have to cut services and reduce the quality of life in those towns, and make it less likely that they’ll land the conventions and events that give them all these visitors today.

This WisGOP-backed bill is not just a usurpation of local control of revenues, it’s also regressive policy to dump a sizable portion of tourist-related costs of government onto the local taxpayer, which would force budget cuts onto local government services. But this bill would do just that by funneling more room tax revenues to tourism agencies, and it is yet another reason why it is the Republicans that are the “fiscally reckless, big government” party in Wisconsin.