About the Lodging Tax
The concept of a lodging tax--a tax levied on room rates in hotels and B&Bs--was first suggested in a public meeting back in September by Alderman John Friedman (Third Ward). The rationale for the tax was explained by Alderman Nick Haddad (First Ward) in a press release issued a few weeks ago by the Common Council Finance and Legal committees. (Friedman chairs the Legal Committee; Haddad chairs the Finance Committee.) "The Finance Committee has challenged itself to replace $1 million of the roughly $4 million property owners contribute to the City budget each year by broadening the tax base." A 4 percent lodging tax is one of the strategies for achieving that goal.
Haddad goes on to say: "We've been very sensitive to how such a tax might harm our lodging sector. But all of our research indicates--and we can't find anything to contradict it--that consumers expect to pay a lodging tax and so adding one where there is none has no effect on demand for rooms." Friedman added that the national average for a room tax is 14 percent. What is being proposed is a 4 percent tax, which combined with the existing 8 percent sales tax will be 12 percent--below the national average.
The proprietors of the established B&Bs, inns, and hotels in Hudson are not sanguine about the proposed lodging tax. The fear is that an additional 4 percent tax will drive visitors from the traditional lodging to the many apartments, houses, and guest rooms being marketed on AirBnB and VRBO and an "informal hotel" that Friedman says is "operating under the radar" where the lodging tax may not be charged.
To make the case for the lodging tax, which Haddad stresses "is financed by visitors not locals and in a manner the research shows doesn't affect demand," the Finance and Legal committees have scheduled a public hearing to take place on Thursday, February 12, beginning at 6 p.m., at City Hall. Friedman explains, "This hearing will be a forum for the Committees to hear from members of the community on the various issues surrounding a lodging tax and how it is applied, as well as the impact of short-term stay services on the lodging industry and neighborhoods."
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"The proprietors of the established B&Bs, inns, and hotels in Hudson are not sanguine about the proposed lodging tax. The fear is that an additional 4 percent tax will drive visitors from the traditional lodging to the many apartments, houses, and guest rooms being marketed on AirBnB and VRBO and an "informal hotel" that Friedman says is "operating under the radar" where the lodging tax may not be charged."
ReplyDeleteNot only are the approx. 113 Airbnbproperties in Hudson not going to be collecting bed tax, they aren't collecting sales tax so visitors will be saving 12% per night by staying in an unregulated Air Bnb, VRBO lodging establishment. There is an ever increasing housing shortage in Hudson as landlords realize they can make more money renting by the night/ weekend and this bed tax will only aggravate that situation.
Sorry, Nick, but taxing businesses (in this case B&Bs) in order to "expand the tax base" is very shortsighted. Owners of B&Bs already pay hefty property taxes, so you're not expanding at all; you're only adding to the burden -- and discouraging consumers. (And what about Air BnB?) Expanding the tax base can be accomplished by reforming the property tax system, which remains a mess, continues to be poorly implemented and grossly unfair. Also, the City seems to be talking out of both sides of its mouth: the Mayor says there's plenty of money for a second large-item "free" garbage pickup while the Council keeps implying that our local government needs more money. What's the truth here?
ReplyDeleteNearly every municipality with a modicum of fiscal sense utilizes a room-tax. In tandem with this proposal we are most certainly trying to deal with the AirBNB/VRBO issue, again, as nearly every other City is.
DeleteAnd frankly, these unfounded superstitions about consumers choosing not to visit a BnB over a room tax? We can do better, really.
I'm amazed at all the straw-men hoisted in opposition to mitigating the unimaginable property tax burden in this City with a sensible revenue stream predicated upon one of the primary economic engines of this area.
Pete, do you have a single actionable proposal for dealing with our growing pension, healthcare, and infrastructure costs? Much less how we might spend a single penny on trees, parks, signs, and all the other things most Cities would budget for should they be lucky enough to become a tourist destination? Review the budget, sincerely, and get back to us with your suggestions. Until then I think this is a fantastic proposal.
The owners of Hudson’s B&B’s, inns, and hotels are generally under-appreciated drivers of our local economy and I would strongly oppose anything that would hurt their business. However, as the proprietor of well reviewed and well located rental apartment that is listed on airbnb, my personal experience suggests the impact on their business would be minimal. In almost every case, by the time we are contacted by a potential renter, every “traditional” room in town is already booked, and the majority of those rooms are already more expensive than our rental. Given this demand, and the fact that most travelers are already used to the idea of lodging tax, I find it hard to believe a 4% increase could significantly alter the situation. And all property owners in Hudson, including the owners of B&B’s, inns, and hotels, stand to benefit from this proposed redistribution of the tax burden.
ReplyDeleteI would welcome a "redistribution of the tax burden," but this is not how to do it. (Peter Frank, are you FOR a lodging tax on arbnb?) We can't keep adding taxes when the fundamental taxing vehicle -- property tax -- is broken. It's just pouring more gas into a car with a leaky tank. A redistribution of the burden must start with property tax.
ReplyDeletePete: Thanks for questioning me on this. Yes, I do believe a lodging tax should be implemented broadly and equitably on all forms of taxable short term lodging, including airbnb and VRBO. This already exists in some locales and will inevitably occur more widely in the future. See https://www.airbnb.com/help/article/653.
DeletePeter do you collect and pay sales tax on your Air BnB property?
ReplyDeleteThere is an interesting equation involved here. An across the board tax looks to directly benefit the City of Hudson, but what are the direct results to local businesses? Often, local residents, and businesses, refer to possible temporary rooming opportunities to both established BnBs and AirBnBs. All might add indirectly to additional businesses locally. But what is the greater good? What is the better equation for more dollars spent locally? What does the City of Hudson promote? And thus, why should it receive a portion of a visitor's payment to a local business?
ReplyDeleteGood idea, the property tax here is too high, any extra income to offset it is helpful to the locals at a cost only to those who can certainly afford it and expect to pay it anyway. Call around the state, any destination towns, Lake George, Niagara Falls, even little unheard of places charge a lodging tax. If it's a problem with the little guys not collecting and paying the tax then make sure they collect and pay. Problem solved. Why should the local property owners finance the discounted, untaxed rooms for the vacationers who come to Hudson? Makes no sense to me, they would pay it anywhere else.
ReplyDeleteSlowArt, a bed tax was not a problem before the existence of VRBO and AirBnB
ReplyDeleteSo Peter the answer is no you do not collect sales tax on your nightly Air BnB rental. If the city insists on applying a bed tax on only the registered (insured, inspected four rooms or less owner occupied) B and B's then we are putting the cart before the horse. If a visitor can save 12% per night (8% sales+ 4% bed) by staying at an Air BnB property they will and we legal lodgers say to the city "hey thanks a lot"
ReplyDeleteI also thing there is a misconception about how much the city can gain from a bed tax. Hudson is closed on Wednesdays and Tuesdays are rough as well. the lodging establishments in Hudson are averaging about 40% at best with many at around 25%
The other question here is why the Council is picking on B&Bs, what Peter Frank rightly calls the "under-appreciated drivers of our local economy." Why not tax banks? Why not review the huge corporate welfare program known as Payments in Lieu of Taxes (PILOTs), which gives large companies, mostly owned by absentee landlords, huge property tax breaks? There are so many other things that the Council needs to do before picking the low-hanging fruit of our wonderful hospitality business owners.
ReplyDeleteWe need to really get a handle on how to bring the AirBnb's into the mix, so there is a level playing field, for this proposal to move forward. Otherwise, I suspect it will die. When I googled this issue, I learned that other cities have induced the websites that advertise these units, to collect a bed tax on behalf of the municipalities. I mentioned this to the Legal Committee, and offered to send links to them, but John Friedman said he was already aware of that. If he is, hopefully this potential "fix" for securing a level playing field will be more thoroughly investigated and discussed than it has been to date. Nobody likes taxes, but the choices here are adding a bed tax to the revenue mix, continuing to rely on just property taxes primarily, with all the disadvantages associated with that, or the city probably facing a revenue shortage, with the attendant of deferred maintenance and capital expenditures and like. We must choose. There is no free lunch.
ReplyDelete