As Senior Reporter Sue Guinn Legg reported in Tuesday’s edition, the town’s Board of Mayor and Aldermen approved a 2.5% tax on lodging stays. That’s on top of Unicoi County’s existing 5% county levy on hotel/motel accommodations.
You can add that to the state sales rate of 7% and the local option rate of 2.75% (the maximum available under Tennessee law) and a night’s stay in Erwin will run a visitor a 17.25% combined levy on the price of a room.
In light of the existing county tax, the state comptroller’s office rejected the town’s initial proposal to add a 5% tax earlier this year, which would have resulted in a 19.75% combined rate.
Still, the smaller increase approved Monday makes Erwin’s combined rate second in Northeast Tennessee only to the municipal rates in Sullivan County. According to state data collected in 2015 (the latest available), Sullivan’s rates range from 19.75% in Bristol to 21.75% in Kingsport and the county’s section of Johnson City. The latter is the highest combined rate in Tennessee. In the Washington County portion of Johnson City, the rate is 16.75%.
Erwin’s justification for the big tax? Town and Unicoi County leaders want the mountainous county to be more of a destination, and a consulting firm recommended using hotel/motel tax collections in part for a new tourism development office.
Unicoi County’s existing outdoor amenities — including Nolichucky River rafting, the Linear Trail in Erwin and the Pinnacle Trail on Buffalo Mountain — already offer outdoor enthusiasts reason to visit. The county is also home to a section of the Appalachian Trail and a popular hostel, as well as Tennessee’s newest state park, Rocky Fork.
And that’s just a fraction of the recreational potential in a county filled with ridges and streams.
So it stands to reason the town would want to capitalize on the traffic by taxing the travelers. Tourism dollars not only help local businesses grow, but also can ease the tax burden on residents.
We’re no fan of new taxes, but there appears to be little downside for a government to tax visitors. A recent Tennessee Advisory Commission on Intergovernmental Relations report found that lodging customers overall are not all that sensitive to higher prices. Lodging taxes have little to do with choice of hotel.
The Comptroller’s Office was right to reject Erwin’s first shot at a big lodging tax. The 2.5% rate is reasonable, keeping it competitive with neighboring Johnson City’s slightly lower overall rate. The key will be just how local leaders invest those dollars in their efforts to draw more people to Unicoi County. More amenities. More reasons to visit and stay.
Taxes are just excessive burdens on consumers if they are not put to good use.