"Famously Hot" Billboards Burn Taxpayers for $500,000

Bryan Cox
August 13, 2009

Richland County taxpayers purchased 29 new billboards along the state’s Interstate highways last month to promote Columbia-area businesses as part of the area’s “Famously Hot” advertising campaign. The ads went up at a cost of $500,000 and will remain in place for a year, according to the S.C. Hospitality Association.

The campaign is funded entirely through a two-percent state surtax on hotel rooms as well as a Richland County surtax on hotels and prepared meals.

The campaign’s proponents apparently miss the irony that taxing hotels and meals drives up the price and actually makes it more difficult for these businesses to compete.

Douglas OFlaherty with the state hospitality association described the state’s advertising strategy as a tandem effort between private business and government. He pointed to a recent study produced to defend public tourism spending that cites Colorado and New Jersey, and claims each state saw its share of visitors decline after the state scaled back tourism funding.

The hospitality association did not respond to questions whether the study was funded by the same government agencies who stood to benefit from its findings.

OFlaherty stressed the hospitality association does not impose taxes on its own, but operates under government guidance and makes the best use of whatever resources it is given.

“We would love to see lower taxes, but as long as the tax is in place we are going to do everything we can to generate the highest return on investment we can,” said OFlaherty.

While no information exists to suggest the hospitality association is doing anything other than making the best use of the dollars it is given, the fundamental criticism lies with state and local lawmakers who support hospitality taxes to begin with.

Nearly $800 million of the current state budget comes from borrowed federal stimulus dollars that will expire in two years. On top of that, state tax collections are down more than 12 percent from this time last year. All indicators are state and local governments will face serious, sharp cuts in the near future.

Yet instead of making tough choices now and eliminating needless spending to protect core services, lawmakers are content to blow through dollars and simply hope things improve.

Here’s a simple concept: eliminate the hospitality tax and government meddling in private business. That would immediately lower the cost of hotels and meals for consumers, and the resulting increase in demand would put more money in the pockets of business owners as well as generate more tax revenue for the state. It’s a win-win for everyone.

If some entrepreneurs think purchasing ads with that revenue makes sense they are free to do so. But others may choose to hire new staff, reinvest in upgrades, or perhaps even just keep prices lower for customers.

Lower taxes equals lower prices. Lower prices spur demand. Higher demand helps the economy. Is it really that difficult to understand?

Nothing in the foregoing should be construed as an attempt to aid or hinder passage of any legislation. Copyright 2009. South Carolina Policy Council Education Foundation, 1323 Pendleton Street, Columbia, South Carolina 29201. Visit the Policy Council Facebook page at www.facebook.com/scpolicycouncil or Twitter at www.twitter.com/scpolicycouncil.