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Economic Development is . . . (increasing the flow) of capital through the community and reducing its leakage.

Lets be Levelheaded about Taxes: Are Low Hotel/Motel Taxes a Missed Opportunity or Smart Strategy?

One of the top industries of Tama County is the travel industry. It employs over 13% of our workforce, serves as a landmark definer on the rural landscape, is a cradle for quality of life, a powerful economic multiplier, and easily underestimated because indirect cause and effect relationships may not be apparent at first glance. It is also one of the honorary primary industries where average local citizens have a lot of power to influence the economy positively.

Apart from touting local tourism attractions that we endorse ourselves, Iowans can also enact local Hotel/Motel Tax if they choose to. Most commonly healthy communities do choose to enact the full allowable 7% Hotel/Motel Tax, and the resulting income is invested to benefit the collective business community in a way that would grow the funding source. However, none of Tama County’s local entities have enacted this opportunity fully. Why is that? There are at least two schools of thought:

  1. CAPTURING A LOW (OR NO) TAX IS BEST: The argument here is that to allow the lodging venues in Tama County to be as successful as possible, we need to help them keep their cost low so they can compete on price after taxes with the surrounding area. Once travelers are in Tama County, their purchase of food, gas, recreation, retail and other incidentals contribute to the economy at an accelerated rate.
  2. ADOPTING THE INDUSTRY STANDARD IS BEST: The other school of thought questions the degree with which a tax rate is factored into an end user’s lodging decision because most travelers have place bound objectives. If travelers make their lodging decisions assuming we already have industry standard tax rates, we may be leaving $ on the table that could have been captured to collectively grow the economy.

In anticipation of continued increase in road travel through Tama County, and 300+ temporary workers on wind turbine construction, power lines, roads, bridges and rail, should low or no hotel/motel tax be re-evaluated? And what would be the smartest direct reinvestment % to proactively help grow this industry specifically?

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