On October’s ballot, we may see an option to increase Juneau’s bed tax by 2 percent. Some people seem to think that 7 percent bed tax isn’t enough for Juneau. If the bed tax goes to 9 percent, the hike would put Juneau at a combined tax rate of 14 percent, making it the 11th highest tax rate levied against lodging in any city in the nation. The purpose of this boondoggle is to raise $400,000 a year, which is a mere 0.12% of our city’s $335,000,000 annual budget.
What the proponents of this tax increase fail to consider is that the tax, instead of filling our coffers, could have a very negative impact on our economy. Tourism, as an industry, falls into two categories: seasonal and independent. These two categories compete with one another. Seasonal tourism is tremendously profitable because it is well-situated downtown, enjoys a favorable government, and shuts down for half the year to cut costs. Hotels do not have this option: they only make money during certain times of the year, and struggle to scrape by in the off-season. The bed tax gives seasonal tourism another unfair advantage over independent tourism, as the cruise ships carefully weigh the price of their discount packages against other forms of travel. Not only hotels, but independent tourism as a whole is being squeezed out by its seasonal counterpart. We see the effects of this as every year, as more and more visitors pour off the cruise ships to run what Pat Race eloquently refers to as the “Tourist trap line.” This machine does not benefit everyone invested in the tourism; it was built by investors savvy to the cruise ship dollar, and it displaces all other forms of tourism.
With all of this in mind, seasonal tourism is an industry that’s booming in our town, yet pays far less in taxes. Here’s why: a piece of jewelry or an expensive artifact in a gift store can sell for as much as $40,000, yet will be taxed for no more than $250 (due to the tax cap provision limiting taxed quantities to the first $5,000 or less). A small hotel, however, might pull in that amount in a month, but in so doing will be required to pay not only the reglementary $2,000 in sales tax, but also $2,800 in bed tax, being an arbitrary tax applied to that industry. This seems ironic to me because tourists buy things that cost more than the average hotel can make in a month! Juneau has a liquor tax, a bed tax, but when it comes to any other goods or services, there is no additional tax levied. Despite the fact that tourism is the single largest private sector economy in Juneau, our government has neglected to impose an indirect tax on this enormous untapped resource. A luxury tax could reap enormous revenues for the city, and level the playing field in the process for independent tourism.
To those who aren’t familiar with it, a luxury tax is a tax placed on products or services that are deemed to be unnecessary or non-essential. Hotels are an essential part of our community, as well as our economy. Without them, independent travel and legislative government would be untenable in Juneau. This is why we must consider raising our bed tax to be a dangerous proposition, especially when we have the option of making seasonal tourism pay its fair share. We could continue to tax an industry that is being squeezed by seasonal tourism, or tap the resource that has been displacing our local economy for years. Conversely, a raise in bed tax increases the unfair advantage that seasonal tourism already has against its independent counterpart.
• Joshua Adams is the author of The Life and Times of the Alaskan Hotel.
