Subsidies for Thee, but Not for Me

Jamestown Settlement — tax thyself!

The economy of the Historic Triangle — Williamsburg, Yorktown and Jamestown — depends heavily upon heritage tourism. Visitor spending reached $1.08 billionand employed 11,000 workers in 2012, according to one report. But last year tourism and hospitality officials were complaining that growth had stagnated.

So, what do you do to boost the region’s No. 1 industry?

Raise taxes, of course. This year the General Assembly passed a bill backed by Senate Majority Leader Tommy Norment, R-James City County, to impose a 1 percentage point surcharge on the sales tax to raise revenue to be split equally between a new effort to rekindle Historical Triangle tourism and the three Triangle localities of Williamsburg, James City County and York County, reports the Daily Press. Williamsburg would use the funds to roll back the admissions tax and hotel and meals taxes it approved last year.

Sen. Monty Mason, D-Williamsburg, had opposed the tax all along on the grounds that it impacted poor people the most. After the bill sat on the desk of Governor Ralph Northam for three weeks, he prevailed upon Norment to amend the tax. The revised version would exempt the sales tax on food and add a $2-a-night hotel surcharge to recoup the lost revenue.

“I think this could be transformational,” Norment said.

Bacon’s bottom line: I don’t normally agree with Democratic Party politicians, but Mason is absolutely right about this. It’s one thing to tax hotels and restaurants, as Virginia Beach does, to raise funds to pour into marketing, promotion and infrastructure building. Although local residents do pay more for eating out, the tax is largely paid by the industry itself. But levying a sales tax on the general populace to benefit the industry is quite another thing. Such a tax would indeed impact the poor, who spend a disproportionate share of their incomes on food — not eating at restaurants but food purchased at grocery stores.

The workforce of Williamsburg, York and James City is about 70,000. In other words, five out of six people do not work in the hospitality industry. Undoubtedly some businesses provide goods and services to the sector, thus benefiting indirectly from its presence, but major employers like the College of William & Mary and the Anheuser-Busch brewery do not. The tax would represent a massive subsidy for the tourism sector at the expense of everyone else.

Don’t get me wrong — I personally love heritage tourism. I love visiting Colonial Williamsburg. But is that really the future that Triangle localities want to build for themselves? William & Mary, one of the highest regarded public universities in the country is located there. The Kingsmill Resort, which caters to affluent retirees, is located there. NASA Langley and Thomas Jefferson National Accelerator are located a few miles down Interstate 64. For $25 million a year, the community can’t come up with any better economic development initiative than promoting tourism?

As the dominant industry, the tourism sector is converting its political clout into public subsidies in order to perpetuate, even increase, its dominance. While a 1% sales tax surcharge might not seem like a lot, it will have a small dampening effect on economic activity not related to tourism. For example, the surcharge could encourage affluent retirees to select somewhere else to settle down and spend their money, thus impacting Kingsmill Resort-like development in the future and driving away citizens who pay lots in taxes but demand little in the way of government services.

I’m all in favor of not damaging your existing industry by refraining from enacting burdensome regulations and taxes. But if you want to nudge your community into the innovation-driven Knowledge Economy, you don’t do it by taxing the new economy to subsidize the old economy.

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15 responses to “Subsidies for Thee, but Not for Me

  1. I think the Governor’s proposed amendment merely exempts unprepared foods, those grocery items already taxed at the lower 2.5 percent, from the new surtax. Big Whoop.

    Just recently had a nice day visiting the Yorktown battlefield, we run down to the alma mater often, and it was visiting CW as a kid that introduced me to W&M in the first place.* So I really want to see those historical attractions thrive. There is research behind this, I’m sure, but I really doubt a minor burden tax shift is going to suddenly fill up hotel rooms and buses. Travel and vacation patterns are just changing. I love what CW does, but wouldn’t be surprised if it suffers from the same internal growth hormone that infects other non-profit entities.

    Deep down I’ve always been a bit of a fanatic on tax uniformity and on that basis alone this is a very bad precedent. The camel’s nose (regional sales taxes for regional transportation) is now joined by the whole head and the camel is coming in. Remember the other bill this year creating a myriad of tax shifts to draw business to the SW region. Where this leads is not a good place.

    *Rare footnote. My wife was working in the College Shop on DoG St in 1976 and really was asked by a tourist, “what are they going to do with the college after the bicentennial?”

    • * My daughter, a W&M student in 2002, was asked while working in the DoG cheese shop if they sold only reproduction 18th century cheeses or “real cheese you could actually eat.”

    • Why are you a big fan of tax uniformity? Why do you care (and, frankly, what business is it of yours) if the people in NoVa want to pay higher taxes for things they find important? Should there be standard state wide real estate taxes and BPOL taxes?

  2. Frightening comment in your footnote, Steve!

    I started questioning tourism numbers and spending in Virginia when our draft Comprehensive Plan Update stated $31.9 million of a total $38.8 million in Taxable Sales was from Tourism Expenditures. Remember, we have no amusement parks, no hotels or motels in Mathews, and not that many B&B’s. So where did the tourism number originate?

    The Virginia Tourism Corporation uses statistics provided by the U.S. Travel Association https://www.vatc.org/research/economicimpact/ “All estimates of the economic impact of travel contained in this volume are the product of the U.S. Travel Association’s Travel Economic Impact Model (TEIM), a proprietary economic model developed expressly to indicate the expenditures, employment, payroll, and tax revenue generated by travel away from home in the United States.”

    The U.S. Travel Association representative I contacted explained how they determined the amount of tourism expenditures: This is an excerpt of the way they determined the amount of tourism expenditures:
    “At the local level – Due to the issue of small sample size in most of travel surveys, local area travel impact estimates are derived by distributing the state estimates to the area using proper proportions of the area for each related category. The proportion of a local area in state total for each related category is calculated based on available and reliable economic data provided by state and local government. County sales, employment, payroll data from the Economic Census, County Business Patterns and the Quarterly Census of Employment and Wage conducted by federal governments are also used in the calculation. For some industries that are more impacted by local consumers, such as retail shopping and restaurants, etc, the local area distribution is weighted by using highly travel intensive category data, such as lodging and attractions, etc.”

    To come anywhere near the tourism numbers given in the draft plan, means Mathews residents could only spent an annual total of $750-900 per person for their food, gas, recreation, lottery tickets, restaurants, all retail store purchases, and any miscellaneous business in the county.

    The bottom line is the U.S. Travel Association hasn’t got a clue about what goes on in Mathews County. They take statewide and national numbers and let their computer model decide what number to use.

    So are the Historical Triangle tourism estimates any better?

  3. “What are they going to do with the college after the bicentennial?”

    That is a Classic!!! A timeless comment for the ages. A fantastic metaphor that speaks volumes about our modern American consumer culture.

    As to the merits of the taxes as originally proposed, and as amended: These bills are a particularly pernicious form of public corruption. They constitute a variety of crony capitalism that imposes pervasive taxes on citizens’ rights to eat at home and in restaurants so as to benefit a few fat capitalist with political clout. The Virginia political machine is famous for this sort of corrupt maneuver. It’s everywhere in public decision making in Virginia.

    This is what destroyed Fairfax County, and Dulles Airport, for example.

    This form of public corruption is also driving most all important decisions made in public education today, secondary and now higher education. So education becomes progressively less and less about educating students, and more and more about soaking schools for the advantage of private interests. Like teacher’s unions, political parties and politicians, administrators who run the schools and fat cat professors, and crony scientists, and corporate interests of all sorts – political, commercial, non-profit, plus ideologies, and cultural warrior professors too.

    All these forces twist Virginia’s systems of education out of shape. Costs soar. Families are bankrupted. Student don’t learn. Or they learn toxic ideologies that destroy their future, heritage, and culture (the very ground the young need to stand on, to build their future) while they breed hate among groups of students and citizens, tearing society apart.

    We see the wreckage everywhere, most recently at Virginia Tech. This rot is what happens when schools are run by business people to serve ever growing groups of business and political interests, while the same leaders drain ever more public funds away from tools and resources that are now critical to educating kids in all kinds of different way to succeed in their life.

    Another result of this public corruption is that leaders in education must increasingly lie about the needs of students and the ever changing needs of institutions to serve those students in the modern world. A recent example is Virginia’s SCHEV telling the public that:

    “Virginia in 2016-2017 awarded 54,508 bachelors degrees, 24, 405 in STEM disciplines (science, technology, engineering, and math).

    And that “Of all jobs created since the Great Recession, 99% went to individuals with more than a high school diploma.”

    Meanwhile, in the face of these bogus claims by our leaders, the quality of high school education and higher education deteriorates, as schools are increasingly built and operated to fail their students, while the costs that those schools impose on students and their families spins sky high.

  4. I know this sounds highly irregular but totally agree with Jim B!!!

  5. Looking a little further into this, I wanted to see how stagnant the economics of tourism spending in the Triangle is.
    Most recent that popped up was through 2015 in the Virginia Gazette on Sep 16, 2016:
    Virginia Gazette Sept 16, 2016
    Tourism spending in the Historic Triangle
    2015: $1.18 billion; 3 percent increase from previous year
    2014: $1.15 billion; 6 percent increase
    2013: $1.12 billion; 7 percent increase
    2012: $1.09 billion; 11 percent increase
    2011: $1.04 billion; 11 percent increase
    2010: $975.85 million; 4 percent increase
    http://www.vagazette.com/news/va-vg-tourism-0917-20160916-story.html

    Then I found this in the Richmond Times-Dispatch, from Jun 29, 2017:
    Colonial Williamsburg Foundation – which lost $277 million over five years – to outsource some operations, cutting dozens of jobs
    http://www.richmond.com/business/local/colonial-williamsburg-foundation-which-lost-million-over-five-years-to/article_ce2ec32c-a853-5cb6-9ebd-c1bf41b623f9.html

    The Colonial Williamsburg Foundation is outsourcing some of its operations and cutting 71 jobs as the nonprofit that operates the historic site and tourist destination tries to stem years of financial losses — including a $54 million loss in 2016 — that have been draining its endowment.

    In a major strategic change, the foundation’s top executive said Thursday that it will outsource to private vendors its golf operations, its 19 retail stores, much of its maintenance and facilities operations, and its commercial real estate management.

    “The problem is that we have been drawing too much money from the endowment because we have had to subsidize the losses in the commercial business lines,” President and CEO Mitchell B. Reiss said in an interview. “What we do best is history and education. We need to get back to focusing on that. We need to make sure the endowment supports only that.”

    So is it poor business management and decisions over a period of years adding up to a loss rather than an actual decline in tourism. Or, possibly, the spending numbers from VTC were exaggerated in the first place, giving a false picture.

    The Daily Press, February 28, 2018
    http://www.dailypress.com/news/williamsburg/dp-nws-historic-triangle-tax-20180226-story.html

    I’m with Del. Brenda Pogge on this one:
    Pogge said she felt it was wrong for the General Assembly to enact a tax on behalf of a locality. “It undermines the accountability that I believe elected officials have toward their citizens,” she said.

    “Pogge said she did not feel promoting tourism was a core function of government.

    “Norment, noting that some 12,000 people in his district work in tourism, disagreed: “I can’t think of anything that’s more of a core function of government that keeping people employed and promoting the economy.”

    “He said the Historic Triangle needed to work harder to develop itself as a tourism destination, noting that both Virginia Beach and Richmond currently spend more promoting their attractions.”

    Attracting more business isn’t going to help if these operations aren’t more careful about their decision making and business management in the future.

  6. Carol –

    Thanks for very informative comment. Much can be gleaned from it.

    For example:

    Tourist spending in the Historic Triangle is not static, as falsely alleged.

    Instead, this following statement strongly suggests that residents food is being taxed in order to support new installed private commercial vendors, not foundation activities. Surprise, Surprise.

    “In a major strategic change, the foundation’s top executive said Thursday that it will outsource to private vendors its golf operations, its 19 retail stores, much of its maintenance and facilities operations, and its commercial real estate management.”

    On the other hand, image how well the Historic Triangle would be doing if Virginia’s schools, universities and colleges taught real history in these post modern times, instead of trashing real history, and most particularly white people and their history in Virginia.

  7. Jim,

    You’re spot on in your critique and analysis. Why is it that the tourism industry repeatedly turns to general taxation in order to support marketing? Why doesn’t the tourism industry do something like commodity producers, who assess themselves with agricultural check off programs? The monies do the same thing – promote marketing and research. But in one case the industry absorbs the cost (and ultimately passes it on to the consumer) and in the other, it’s passed on to all taxpayers.

    I’ve been involved with local visitor and tourism bureaus, who used their hotel taxes wisely. But general taxation, as proposed in your article, seems unfair to the taxpayers.

  8. I am once again amazed by the lack of attention to the real flaw in this whole story. But first – let me state my assumption that the tax in question is some regional tax that will be imposed around the so-called Historical Triangle. The real flaw is that my state Delegate and state Senator would even get to vote on this! What the hell business is it of mine (or my representatives) if the people in the so-called Historical Triangle want to tax themselves more to promote tourism in their area? Why are NoVa’s all but useless representatives in the General Assembly even wasting their time thinking about this? They should either abstain under the theory that it’s none of their damn business or ask the representatives from that area to vote first and then vote with the majority.

    What is Virginia’s fascination with management by Politburo?

    I can still remember when Barbara Comstock was a newly elected state delegate from my district. She was assigned to the Agriculture Committee. Are you kidding me? It must have been those amber waves of grain that are so prevalent in Fairfax County that inspired that assignment.

  9. Probably because Tommy Norment would block others getting what they want if they did not go along with this.

    • Anything that has “Norment” or “Saslaw” attached to it needs to be counted, audited, re-counted, reviewed by an independent panel, given a proctological exam and then, and only then does it rise above the 50% probability of being anything other than a self-serving scam.

  10. Up our way – there are dedicated taxes like lodging taxes that fund the tourism and economic development office.

    I’d heard for some time that Williamsburg was in financial trouble because it’s losing out to other attractions that are are more appealing to families.. and “history” has limited appeal these days.

    But it does appear that the endowment is what is used to “create” jobs and if the endowment cuts back funding to only it’s essential mission – Williamsburg is going to feel it.

    Should Williamsburg wean itself off of the Foundation-created jobs?

    What would/should Williamsburg do – instead?

    It looks like their fates are intertwined.

    and if the Foundation jobs go away – Williamsburg will
    get some of the brunt of it also.

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