May 10, 2021
To: Members of the Texas House of Representatives
From: Americans for Tax Reform
Re: Reject HB 2889
On behalf of Americans for Tax Reform (ATR) and our supporters across Texas, I urge you to reject a new tax on travel agent services, HB 2889. This legislation would change the law to expand hotel occupancy tax to travel agent services, imposing new taxes and burdens on the tourism industry.
HB 2889 is an estimated $67 million tax hike over two years. Not only is it a tax increase, it is a tax increase on the tail end of a pandemic that has caused great disruption to the economy. Further, it targets an industry, and workers, that have been extremely hard hit by that pandemic.
Job loss in hospitality in Texas has been worse than any other industry, employment was down 23% from February 2020 to January 2021 (Private Enterprise Research Center at Texas A&M).
Texas has been a leading state for growth and prosperity thanks to its low taxes, and lack of an income tax. This approach has seen the state weather the pandemic much better than others, attracting new residents, along with naturally rising revenues due to that growth. The budget is in better shape than expected, and the state also has billions of dollars from the recently passed federal aid package.
The new tax in HB 2889 would impact all travel booking fees, driving up costs for Texans and out-of-state visitors when they use in-person, or online travel booking services. Taxes are already collected on the price agents arrange with a hotel. Adding occupancy tax to travel agent service fees is a tax increase on tourism.
Online Travel Agents, or OTA’s – like Expedia, Travelocity, and others – make it easier for people to book hotels or other accommodations online. They attract travelers to Texas by offering a variety of lodging options at competitive prices. As such, OTAs are great for restaurants, shops, and other local businesses, as they benefit from tourism.
Texas residents would also be harmed. When traveling throughout their home state, they would either be forced to pay more in taxes when booking through an agent, or they would have to book directly with the hotel, which is often more expensive.
There is never a good time to raise taxes, but this is quite possibly the worst time to attempt to impose this tax increase, especially with the state having excess resources.
ATR opposes House Bill 2889, and urges you reject this legislation.
Grover G. Norquist
Americans for Tax Reform