RECENTLY PROPOSED TAX REFORM legislation could generate $131.7 billion in income for hotels and related industries over the next 10 years, according to a study commissioned by the American Hotel & Lodging Association. The proposed tax cuts could lead to increased business and leisure travel that would subsequently generate more revenue, higher employment in the industry and more capital investment.
Tax reform could lead to a $1.5 trillion tax cut over 10 years, increasing GDP growth to 3 percent by 2018, according to the study by Oxford Economics. Also, the next five years could see $57 billion in direct hotel guest spending onsite as well as ancillary spending at local restaurants, stores and attractions.
The increase in business could in turn lead to hotels hiring more employees and providing more shifts to current employees, the Oxford Economics study found. That would generate $22.3 billion in additional wages and salaries for U.S. workers, and would also increase state and local tax revenues by $3.9 billion for a total economic impact of $131.7 billion.
“With tax reform moving through Congress and becoming closer to a reality, we are pleased to see the potential for significant financial benefits to the industry, and the U.S. economy,” said Katherine Lugar, president and CEO of AHLA. “It’s particularly critical as three out of every five hotels in the industry are made up of small businesses, many independently or family owned. Tax reform will go a long way in benefiting these individuals, as well as their employees and guests.”
AAHOA also urged passage of the proposed tax reform, with President and CEO Chip Rogers saying cutting small business taxes would allow hoteliers to reinvest in their businesses. “Reforming the system will also dramatically slash overwhelming compliance costs and simplify the onerous complexities inherent in the current structure,” Rogers said. “As first- and second-generation hoteliers, AAHOA members have long endured the rising costs and tax mandates associated with building a business from the ground up.”
Oxford Economics’ study came with some caveats. “Tax policy proposals at this stage are initial blueprints, and are expected to change in the legislative process,” the study says. The current study assumes that, with the $1.5 trillion tax cut, there will be a reduction in personal income and corporate taxes leading to net tax cuts over 10 years. The tax cuts are expected to sunset after 10 years under the rules of budget reconciliation, and Oxford Economics points out the propose tax cuts “disproportionately benefit higher-income households” that are less likely to spend the additional income.