POSITION:
The Pennsylvania Tourism & Lodging Association opposes an increase in the state sales and use tax.
CURRENT BILLS:
In February, Governor Rendell presented his proposed 2007-2008 budget plan to the Pennsylvania General Assembly. In fund the budget, he has proposed a 1% increase in the state sales and use tax rate.
SUMMARY:
The sales and use tax rate would increase by 1 percent, from 6% to 7%, effective July 1, 2007. The 1% increase is expected to generate $1.246 billion during 2007-2008: $826 million would remain in the General Fund, and $420 million would be transferred to the Property Tax Relief Fund to provide additonal tax relief for Pennsylvanians. Beginning July 1, 2008 and thereafter, 50% of the proposed rate increase would be deposited in the Property Tax Relief Fund. The sales tax rate in Philadelphia and Allegheny Counties would be pushed to 8%.
On July 16, Governor Rendell signed the State budget bill. The $27.5 billion spending bill became law 17 days after the start of the 2007-08 Fiscal Year despite a $650 million surplus at the end of the previous fiscal year. There are no new taxes or tax increases in the budget. PTLA opposed governor Rendell's proposal to increase the state sales tax by 1% from 6% to 7%.
DISCUSSION:
he 1% increase in the sales and use tax rate would also increase the state hotel occupancy rate by 1%. Statewide, lodging facilities collect a 1% excise tax on the rent of every occupancy of a room or rooms. Revenues generated from this tax are directed to the state General Fund. An increase in the state hotel occupancy tax would make it more difficult to raise county hotel room rental taxes in the future. Generally, revenues generated from the county room taxes are directed to local tourist promotion agencies and are used for tourism marketing purposes on the local level. Currently, hoteliers in several counties are interested in raising the county hotel room taxes in their respective county. An increase in the state hotel occupancy tax and an increase in the county hotel tax would be problematic. A combined total tax increase of 2% would make the tax burden uncompetitive compared to other room tax percentages in the country, and would result in a reduction in room sales and associcated visitor spending. Also, the the additional tax revenue from the 1% percent increase in the Govnernor's proposal would not provide property tax relief for businesses.
09.24.07 - Updated
