Earlier this week the Louisiana House Municipal, Parochial and Cultural Affairs Committee voted on the bills HB 1210 and HB 1083. HB 1210, a local tobacco tax hike for New Orleans, was rejected by the committee, but HB 1083, an additional 1.75% hotel occupancy tax for the city of New Orleans, passed the Committee and is scheduled to be debated on the House floor on Wednesday, May 7th.
Proponents of higher taxes believe that the bills intended to raise the New Orleans hotel occupancy tax by 1.75 percent, the tobacco tax by 75 cents, and property taxes in the city by one mill will generate more than $38 million per year for the city. Representative Helena Moreno claimed that House Bill 1210 specifically would have generated as much as $18 million in higher tobacco taxes.
Mayor Mitch Landrieu (D) is facing a difficult decision with regard to the city budget. The problems associated with the firefighter’s pension fund and the city’s prison and police force weren’t created overnight, however. Even more, the mayor stood before City Council over a year ago outlining the steps necessary to pay for these issues without raising taxes but hasn’t taken the necessary to rein in spending since.
Unfortunately, cities that have made the same argument about revenue time and time again have been disappointed at the results. Raising tobacco taxes does not necessarily raise revenue. Take the Chicago example. In 2006, Chicago collected $32.9 million in cigarette taxes. After two consecutive tax hikes, revenue fell to $16.5 million last year. Carrie Austin, chairman of the City Council’s Budget Committee acknowledged this reality, stating, “We’ve run sales away.” What’s more, local small businesses lost tens of thousands of dollars as a direct result as consumers purchasing tobacco across county lines. As such, Louisiana legislators were smart to reject a tobacco tax in committee this week.
Regarding hotel occupancy taxes, if the city of New Orleans collected in the general fund as much of the tax as Atlanta does, instead of a mere 11.5 percent, most of this year’s consent decree expenses would be covered. Instead, most money goes to the Convention Center, Superdome, transit, and the Orleans School Board. Hotel taxes seem like the politically perfect revenue maker since hotel guests are usually tourists from outside the state who can’t vote Louisiana lawmaker out of office for imposing such misguided tax increases. However, the New Orleans economy relies heavily on tourism and any attempt to make the city less attractive for tourists could depress the local economy and result in job loss, or at least less job and economic growth than would’ve been the case without the new levy on hotels.
Louisiana residents are still coping with tax increases imposed on them from Washington thanks to Sen. Mary Landrieu’s (D-LA). The last thing New Orleans residents need is yet another tax increase imposed by her brother. ATR urges Louisiana House Members to vote ”No” on HB 1083 next week.