Expanding hotel tax will create problems

In proposing to expand the state’s hotel tax to include vacation rentals and bed-and-breakfasts, Gov. Lincoln D. Chafee displays the approach to governance that has left Rhode Island with ongoing fiscal problems and an anti-competitive tax position. More

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PBN Editorial

Expanding hotel tax will create problems

Posted 3/26/12

In proposing to expand the state’s hotel tax to include vacation rentals and bed-and-breakfasts, Gov. Lincoln D. Chafee displays the approach to governance that has left Rhode Island with ongoing fiscal problems and an anti-competitive tax position.

To begin with, neither Connecticut nor Massachusetts apply or collect a similar tax. And by driving up the costs to people who vacation in the Ocean State, it will likely also cut their numbers. And if fewer renters come as a result of the higher costs, it makes sense that fewer people would be able to afford to purchase (and own) rental homes, creating a new, unintended wave of empty (or worse, foreclosed) homes on the market.

The governor argues that expansion of the 13 percent hotel tax is a matter of fairness, and that it prevents further budget cuts. But at the core of this issue is the governor’s commitment to increase state spending. While spending more on certain initiatives makes sense (see editorial above), the governor should not take the need to invest as a pass on the need to control state expenses. •

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