In August, the New Orleans City Council excluded hotel room rentals from a new sales tax for enhanced public safety in the French Quarter despite questions about whether the exclusion is permissible under state law. While BGR has not taken a position on the legal issues, today’s BGR NOW report identifies several compelling policy reasons for applying the 0.245% tax to hotel room rentals.
These include the following:
- The exclusion would reduce the projected tax revenue by about $500,000, exacerbating a sharp decline in funding for public safety in the heart of the city’s tourism economy.
- Recommended public safety services other than policing, such as homeless assistance, would receive less funding.
- A key rationale for excluding hotel rooms from a similar sales tax that expired at the end of 2020 was that a citywide surcharge on hotel rooms was already providing $3.7 million for French Quarter public safety. However, local tourism officials have withdrawn that funding, and hotel rooms would contribute nothing with the exclusion.
- There has been no demonstration that the tax – which amounts to 44 cents for a typical pre-pandemic room charge of $180 – would put French Quarter hotels at a competitive disadvantage. Moreover, the exclusion would unfairly concentrate the tax burden on other French Quarter businesses.
- The exclusion deviates from well-established norms and recommended practices for taxation. For example, sales taxes apply to hotel room rentals in the vast majority of jurisdictions, including New Orleans.
For these reasons, BGR urges the City Council to amend a resolution levying the tax to remove the exclusion for hotel rooms.