Texas Considers Tax Hike on a Tourism Industry Trounced by Pandemic

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Posted by Doug Kellogg on Thursday, April 15th, 2021, 6:10 PM PERMALINK

For years, the Lone Star state has been a shining light for other states, showing that low taxes mean big growth.

One of nine states with no income tax, Texas has led the nation in population growth over the past decade, and become the world’s ninth-largest economy.

So it comes as a surprise that some Texas legislators are advancing a tax hike this session, including the chairman of the House Ways and Means committee.

The tax hike, House Bill 2889, would drive up costs when you go online or call a travel agent to book accommodations. It would apply the hotel tax to the small service fees agents charge, which adds new tax and compliance burdens.

It only gets more confounding when you consider the state, along with local governments, will get around $17 billion from the Biden bailout.

There was some overblown fear of a budget gap, but that gap is turning out to be far smaller than expected, and the state has federal cash lying around which further renders budget gap talk pointless.

It gets even worse when you consider the tax in question, is a tax on tourism.

This picks on a hospitality industry that has been absolutely crushed by the 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). 

Not to mention, hiking taxes on booking travel would have a negative downstream effect on restaurants, trucking, retail shopping, and more.

Texas legislators should be on high alert, especially Senate Republicans, as the House threatens to moves this tax hike next week.

The good news, over 40 state legislators have signed the Taxpayer Protection Pledge committing to their constituents they will oppose all tax hikes.

The bad news, some of these pledge-signers are flirting with breaking their commitment – just to support an unjustifiable tax hike that picks on the industries most hurt by the pandemic.

Texas taxpayers should get on the phone and make sure their legislators are not falling for the tourism tax hike trap.

Photo Credit: Patrick Gensel

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