"Desert tourism meccas" like Phoenix, Tucson, Palm Springs and Las Vegas may be "thriving," as an Arizona Republic headline suggests, but they are not all thriving alike.
In a detailed review of the four desert oases, the Republic covered nearly every eccentricity that defines the character of each destination, save one: taxes.
Specifically, occupancy taxes. The range is wide in the above group, and interestingly, the differences in occupancy taxes parallel the differences in occupancy rates.
For instance, in the "key first-quarter season" just ended, Las Vegas had the highest percentage of rooms filled, 89.1 percent, and Palm Springs was on the low end at 73.8 percent. However, Las Vegas' occupancy tax is a full 4.5 percent lower than Palm Springs'. Phoenix and Tucson round out the middle of the group, both with occupancy and tax rates just shy of 80 and 12 percent, respectively.
It seems from this pattern that taxes have something to do with choice of vacation destination in much the same way as taxes influence choice of place to live. That brings into serious question plans for public financing of convention centers and hotels.
Cities may build it, but visitors come when the price is right-and taxes are low.
Officials in San Francisco are alarmed by the city's rapidly declining population of youngsters. In fact, San Francisco has the smallest share of children among major American cities, and 40 percent of parents are considering leaving within the next year.
Why the exodus and where are they going?
City expert Joel Kotkin offers a clue in his report, Phoenix Rising: A City of Aspiration. Facing escalating living costs in cities such as San Francisco, Boston, and New York, middle-class families are increasingly moving to cities like Houston and Phoenix, where they can afford to live the American Dream.
Unfortunately, San Francisco's strategies for keeping families, including $30 million annually for after-school activities and child care, are likely to exacerbate the problem by increasing the tax burden on families. As analyst Matt Ladner showed in the study, The Tax Man and the Moving Van, areas with high tax burdens are losing population to low-tax areas.
San Francisco's theme song of the 60's might be aptly rewritten, "If you're leavin' San Francisco..."
Last Friday, Gov. Janet Napolitano signed an $8.2 billion budget, but she failed to sign a corporate scholarship tuition tax credit because it did not include a five-year sunset provision.
Politics aside, allowing businesses to make scholarship donations is good policy that brings opportunity to thousands of low-income children waiting for scholarships.
In 2003, Arizona School Choice Trust, one of 53 non-profit scholarship organizations, reported having 2,000 children on its waiting list. Their families' median household income was less than $30,000, about 30 percent below the state average, and 70 percent of those children had been waiting for three or more years.
As many as 1,500 low-income children would receive scholarships to private schools under the negotiated $5 million program. What do tax credit scholarships do for families? Ask Tucson mother Sonia Terraza. She says tuition tax credit scholarships helped her family get "started in meeting our goal of providing our children a better education that will enable them to become the future citizens that will lead our nation."
Some politicians may want to stop businesses from supporting scholarships over a sunset clause, but to a child in need, "losing everything is like the sun going down on me."
A recent court ruling could make direct tax incentives illegal. The time-honored tradition of brokering specialized tax deals to lure companies to locate or expand in one state over another could finally be coming to an end. "The economic war among the states," as Minneapolis Fed research director Art Rolnick describes it, could be over.
The case in question was in Ohio, where a federal appeals court struck down a $281 million deal the state gave to DaimlerChrysler. Though it's expected to be appealed to the U.S. Supreme Court, there are pending lawsuits on the horizon in at least three other states.
While some groups oppose the decision on the laudable grounds of maintaining state sovereignty, the economic distorting effect of targeted incentives may call for a decision like this, which was based on the U.S. Constitution's commerce clause. As Rolnick puts it, "From a national perspective, there are no jobs being gained here. Studies show that most of the companies locate where they were going to go anyway. But if you're the CEO of Boeing, you're going to play the game...If you want to promote better economics, lower taxes for all businesses and build better roads."
That's certainly a message worth keeping in mind as Valley jurisdictions continue to base economic development on handouts for the few over a stable buiness environment for everyone.
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