Columbia Should Refrain From Raising Hotel Taxes

The late United States Senator Russell Long used to say that everyone’s ideal tax policy was, “Don’t tax you, don’t tax me, tax that fellow behind the tree.” Nowadays in Missouri, that “fellow behind the tree” is usually a tourist. Officials in Columbia, Mo., are considering paying for an airport terminal expansion with an increase in the city’s hotel tax to 7 percent. That would be a poor decision for the city.

At some level, taxing tourists, via special hotel taxes or other means, is appropriate. There is wide agreement that people are less price-sensitive when traveling and will absorb some additional taxes without changing behavior. So, my complaint is not with Columbia’s current 4 percent hotel tax, which is reasonable by municipal standards. I object to the fact that the first reaction of many cities when they are looking for new revenues is to raise the hotel tax. If the people of Columbia want and need a larger airport, they should pay for it. They should not try to obtain a free lunch by passing off the bill to tourists.

The estimated cost of the terminal expansion is $21 million. Is there another way to pay for that without increasing taxes? Absolutely. A decade ago, the Saint Louis suburb of Florissant privatized its water system. Missouri-American Water paid $14.5 million for it. Columbia, which is much larger than Florissant, operates its own water and electric company. Privatizing either (or both) of those operations could readily pay for a desired airport terminal expansion, if one is truly needed.

The question as to whether terminal expansion is truly needed is fair. The airport currently has just 21 outgoing flights from two carriers per week. The eventual goal (taken directly from the city’s own study) is to add “one or two” commercial air carriers and “a recurring flight” to Chicago. I am not an aviation expert, but I think taxpayers should demand stronger evidence of a true need before investing $21 million on the hope of a few more regular flights per week. Missouri has already experienced one disastrous airport expansion. Saint Louis is stuck in a vicious cycle where it is forced to keep its landing fees high to pay for the hundreds of millions of dollars in airport bonds it issued to pay for its new — and now totally unnecessary — runways.

Voters in two major Saint Louis suburbs rejected hotel tax increases (on top of the already high regional hotel tax) by wide margins in 2010. Those voters said enough is enough to tax increases and government growth. They noted the harm the tax increases would have done to hotels in those two cities. If given the opportunity, Columbia residents should consider sending the same message.

David Stokes is a policy analyst at the Show-Me Institute, which promotes market solutions for Missouri public policy.