Destination Missoula, tourism industry oppose tax increases as budget fix

Destination Missoula and other tourism officials say Gov. Steve Bullock’s proposed tax increases to hotel rooms and rental cars would hurt the region’s tourism industry. Others say increases are a better option that deep cuts to services. (Martin Kidston/Missoula Current)

Missoula’s tourism industry is opposing a plan to temporarily increase taxes on hotel rooms and car rentals as a means to right the state’s budget, saying it would place the region at an economic disadvantage and hurt small businesses that depend upon visitors.

Barb Neilan, executive director of Destination Missoula, joined other state tourism leaders in opposing Gov. Steve Bullock’s proposal to implement a 3-percent increase in bed taxes and a 6-percent increase in taxes on car rentals.

“The truth is that a tax increase this drastic will have a major effect on all travelers – resident and non-resident,” said Neilan. “It will also have a major effect on small businesses and communities that have already had a very difficult year with the fires we’ve had to endure.”

Bullock has said there is no perfect solution as the state works to close a budget gap of $227 million. He’s offered the temporary tax increase as a means to reduce cuts that would otherwise be made to state services, including health care, higher education and corrections.

Rather than make deep cuts, the governor seeks an equitable combination of cuts, fund transfers and temporary tax increases. But the latter tool is opposed by tourism officials, who represent the state’s second largest industry.

Last year, 12 million non-resident visitors spent more than $3 billion across the state. Glacier Country, which represents the state’s western reach from Missoula to Glacier National Park, accounted for nearly 33 percent of all tourism spending in the state.

“We’re certainly opposed to the tax increase,” said Racene Friede, executive director of Glacier Country. “We’d like to not see an increase at all. It puts us at a disadvantage.”

The state’s lodging tax currently sits at 7 percent. A 3-percent increase would place the tax at 10 percent. That, according the advocacy group Tourism Matters to Montana, would make the state’s lodging tax the second highest in the country.

Friede called the proposed increase excessive, adding that a lodging tax of more than the current rate would hurt the state’s ability to compete.

“We utilize the fact that we don’t have a sales tax and that we currently assess fairly low taxes and fees,” said Friede. “We use that as a sales pitch at meetings and conventions. That’s an incentive to bring those groups here.”

The region’s ability to compete with other Western states also helps Montana communities compensate for the higher cost of airfare, Friede said.

“It’s already a tough sell because airfare in Montana is high,” said Friede. “We use those low taxes and fees as a tool to offset our airfare rate. When you bump us up into that other bracket, you’re taking a sales tool away from us. It would impact our ability to be a value.”

Tourism advocates also contend that the Montana Office of Tourism and Business Development has already seen a reduction of $2 million. That leaves less money to market the state as a destination.

A further reduction in visitor spending as a result of higher taxes imposed on hotels and car rentals could further exacerbate the challenge, Neilan said, citing the talking points issued by Tourism Matters to Montana.

“Tourism doesn’t ‘just’ happen,” Neilan said. “Montana’s travel promotion stakeholders work hard to bring travelers to Montana, and budget reductions and tax increases like this make our jobs incredibly hard.”