Hat’s off to our City Board of Commissioners on a recent vote to lower the Hotel / Motel Tax in the City of Mt Juliet. For several years now the city has had a five-percent tax added onto existing state and local taxes making the total tax in Mt Juliet 19.25% per room night. By lowering the PRN Rate to 18.25% (a reduction locally of 1%) Mt Juliet is no longer at the highest level of any city in Tennessee. That is a very significant accomplishment and in my opinion sends a very important message to those we are inviting to spend the night in our community. I have often referred to those who stay overnight in a community, shop in their stores, eat in their restaurants, and then return home to points yonder as “temporary tax payers”. These folks are a huge asset to any community, but perhaps none more important than a community such as Mt Juliet that depends so heavily on sales tax collections to fund and pay for most city services.
In Economics and Economic Development, there is a simple rule that certainly applies to this particular tax decrease; tax what you do not want and incentivize or tax less what you do want. In this case, since we are trying to attract more tourists, overnight business travelers, and other temporary taxpayers, a lower per night room tax makes us a more attractive alternative for their hotel accommodations. Will there be a reduction in the total amount of revenue collected? Of course there will be, but only temporarily! Now other hotel companies will be looking at our community as an even more attractive location for future hotels. As soon as one or two or three additional hotels are built, the combined revenue collected from an increase in the total number of rooms in Mt Juliet will far exceed what would have been collected without the increase in rooms. At some point, in order to become EVEN more attractive, perhaps the local room rate tax goes down to 3%...hum?