Tax Stupidity in NYC

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The New York City Council is about to shoot itself in the foot--again. The legislative body is contemplating what would amount to a nearly 20-percent increase in its already onerous hotel tax. The legislation, which is slated to come up for a vote this week, would bump up the basic tax rate from 5 percent to 5.875 percent. That's not a lot, but when combined with other charges levied on Big Apple hotel stays, it would boost the city's effective tax rate to above 15 percent, the second-highest in the country behind Houston.

Not surprisingly, the city's hotel association is crying bloody murder. Consultant Sean Hennessey studied the effects of the increase, and he concluded that passage of the bill would cost the city $533 million in room sales and other visitor spending and would mean the loss of 3,716 jobs in hospitality and related businesses. Those figures sound inflated to me, because anyone who needs to be in New York for business, or wants to be there for leisure, will pay the additional tax, which on a $300-a-night room amounts to $26.25. That certainly wouldn't be a dealbreaker for most visitors.

Where the city could suffer is in the court of public opinion. In the late 1980s and early '90s, the city's hotel tax was tops in the nation and the Manhattan hospitality industry received a lot of bad press, and probably lost business, because of it. Eventually, the city lowered the tax, the bad publicity went away and Manhattan experienced a long hotel boom.

I know fiscal budgets are tight, and lawmakers need to raise money where they can. But hospitality is the cleanest, most-efficient and best industry any city can have. It's stupid to do anything that would jeopardize this wonderful revenue stream.

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