Bed tax may not be the best route for the borough

  • Saturday, May 31, 2014 8:58pm
  • Opinion

As the Kenai Peninsula Borough Assembly budget process ramps up, the idea of a bed tax as a mechanism to pay for tourism marketing and promotion efforts, among other things, has been floated once again.

Let’s start by making our position on tourism clear: Tourism is a valuable industry to the economic livelihood of the Kenai Peninsula. We support a robust tourism industry and welcome visitors to come back again and again.

The bed tax pitch came during a recent assembly finance committee work session on the non-departmental agencies that receive significant borough funding. The Clarion reported that the Kenai Peninsula Tourism Marketing Council, which has requested $300,000 from the borough, also proposed a 4 percent bed tax. As proposed, the measure would generate $2.8 million in revenue. Revenue collected within cities would go to those cities; 80 percent of the revenue collected in the borough’s unincorporated areas — about $1 million — would go to whichever agency the borough chooses for its marketing efforts. Remaining revenue would go to the borough general fund.

A bed tax is designed to appeal to residents of whatever area in which it’s instituted because, in theory, residents don’t bear the cost of the levy — it’s visitors who stay in hotels, lodges and bed and breakfasts who do.

But it’s disheartening to see a bed tax proposal brought forward again, particularly as there’s no new reason for government to need to generate more revenue. Over the past several years, the borough and city governments have been quite adept at finding funding for a wide range of projects from a wide range of sources.

We have other concerns with a bed tax as well. For one, a bed tax seems a lot like a sales tax, and sales tax collected by the borough is dedicated to funding education, not tourism promotion.

What’s more, the tourism industry already is taxed at a higher rate than other businesses, as recreational sales — defined as guiding, charters, sightseeing tours, outfitting or equipment rentals, and temporary lodging included with such sales — are taxed per person, per day, and are not subject to the $500 cap on the taxable amount, as are most other transactions taxed by the borough.

An industry struggling to rebound from the recession, weak salmon runs and other factors out of its control doesn’t need yet another tax.

We also have concerns with public money being spent to promote any particular industry. Government’s role is to provide a level and fair playing field in which to do business. While the borough and its residents have a vested interest in a successful tourism industry, it’s hard to consider an industry to be thriving if it relies on government funding for promotion.

Likewise, it’s hard to consider an agency that promotes tourism to be self-sustaining — as the Kenai Peninsula Tourism Marketing Council says it would like to be — when the proposed method to achieve that goal is to subsidize it with more public money.

Again, this is not an argument against tourism or its promotion on the Kenai Peninsula. We all benefit when local industry thrives.

But Kenai Peninsula residents need to think critically about the purposes for which taxes are collected. Should marketing for a particular industry be one of those purposes?

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