My take-away from “Wealth of Nations,” the groundbreaking classic by Adam Smith, the father of modern economics, is that in economic policy you get more of whatever you reward, and less of whatever you penalize. This is true of almost all human endeavors; as when our children behave well, we reward them, etc.
In government policy we penalize nuisance industries such as alcohol and tobacco in order to reduce their negative impact and to help offset their cost to society. Conversely we subsidize certain useful and preferred strategic industries such as agriculture or solar power.
Now let’s say that as a Town we have decided that tourism would be useful to the Town’s economy. Following the above axiom, how would a rational person go about encouraging tourism? Would you seek ways to employ the time tested and proven methods of supporting, rewarding and encouraging those businesses in Town that support your objective?
Or would you punish them, burden them and erase their competitive advantage by imposing on them a retrograde, discriminatory tax policy plagiarized from the failed, bankrupt, corrupt cities that spawn such schemes?
The members of the Farragut Tourism/Visitor Advisory Committee who voted to recommend that the Farragut Board of Mayor and Aldermen again consider a Hotel/Motel tax for the FOURTH time should resign in shame and disgrace as their vote betrays an appalling dearth of understanding of marketing, economics and fair-play as well as a towering conceit.
Do they not know that this idea was first reviewed and rejected by the Farragut Economic Development Committee in 2009 and that it has been studied, argued, voted on and rejected by the Farragut Board of Mayor and Aldermen three times in the last six years?
Do they not know that it is opposed by all nine of our fine hotels, all of which chose Farragut partly because of its location but also because of the favorable tax structure of the Town, which gives them a leg up on their competition to bring guests into Town to enjoy our services, restaurants and shopping?
Have they not read the Tennessee Advisory Commission report on “Structuring Lodging Taxes to Preserve the Economy and Encourage Tourism,” which clearly states on page 13 that “a 2 percent increase in a lodging tax would cause about a 2.4 percent reduction in room sales and associated visitor spending per year?”
When you consider that room sales are only statistically 17.4 percent of visitor spending, it doesn’t take a rocket scientist to figure out that this would have a tremendously deleterious effect on our other local businesses and consequently the sales tax revenues upon which the Town relies predominantly for operating funds.
This story is all too familiar and we already know how it ends. As revenues begin to decline because of these wrong-headed policies, the Town is forced to look around for other revenue sources. Soon some genius will propose a restaurant tax, impact fees, a lawn mower tax, a property tax.
In case these committeemen haven’t heard, this ship has already sailed and our Town’s businesses should not be subjected to this kind of bullying every year or two. Instead we should be focusing our efforts on supporting and encouraging these businesses by promoting our Town’s obvious strengths; the policies that have made us the great little Town we are, rather than trying to borrow the tax-and-spend, big government policies of towns like O’Fallon in the bankrupt and second heaviest taxed state in the union, Illinois.
Have they even thought about something as obvious as buying some billboard space a few miles out on all four Interstate approaches to the Town directing travelers to “The Cleanest, Safest, Most Charming Hospitality Exit on the Interstate” with the widest choice of lodging, dining, shopping and services, and the lowest tax rates? Have they thought about how we might market our Town to the 800 or so new units of apartments being completed near or in our borders?
Come on guys, we are looking to you for a little original thought to preserve our Town’s unique heritage and traditions. We have so much to promote. The last thing we need to do is beat up the guys pulling our wagon.
Robert N. (Bob) Markli
Farragut (former alderman)