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House Pushes A New Hotel Tax Into Budget Discussions

The lobby of the William Penn Hotel in downtown Pittsburgh. Lawmakers are considering adding a 5 percent hotel tax as part of budget negotiations.

After extensive closed negotiations, a House committee moved a plan to close part of the $2.2 billion gap in Pennsylvania’s overdue budget Tuesday evening.

It’s expected to be considered by the full chamber on Wednesday.

Its key component is a 5 percent tax on hotel rates that would largely impact major cities, and is already being opposed by the hotel industry.

The rate is currently six percent statewide.

Nearly doubling it would only raise around $100 million this year, and roughly $160 million next year.

But House Majority Leader Dave Reed said even deciding to move forward with the hotel tax is a significant step in a budget process where new revenue has been extremely difficult to agree on.

“This is a major component of it, and I would say this is the component that has been holding up the budget for some time now,” Reed said.

Hotel industry leaders quickly came out in opposition of the hike, saying it will only help competing cities like Washington and Baltimore, and hurt hotel jobs within the commonwealth.

“When we’re competing for conventions, those cities will use that tax rate against us,” Ed Grose of the Greater Philadelphia Hotel Association said.

Grose added, he doesn’t think lawmakers have fully thought it through; the motion passed the House committee quickly, with little discussion.

“It’s a real easy mindset to tax people outside the state when they stay in our hotels. However, that’s going to have a direct impact on our jobs,” he said.

A report from a hospitality consulting firm shows with the five percent increase, Philadelphia and Pittsburgh will have the number one and two hotel tax rates in the country by a substantial margin.

The House proposal also includes a provision to expand online sales taxes, which the Senate supports.

A spokeswoman for Senate Republicans declined to say whether her caucus supports the hotel tax.

A spokesman for the governor said in a statement that Wolf still prefers a natural gas severance tax, but is reviewing the House proposal.  

(Photo Credit: Daveynin/Flickr)

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