Pound foolish


State and local governments are notorious copycats. As soon as one jurisdiction comes up with a meddlesome, money-grabbing plan, the idea spreads like a virus through elected bodies everywhere. Think of new taxes on soft drinks and bottled water or traffic enforcement cameras.

Clark County commissioners are poised to hop on another bandwagon in an attempt to bolster room tax collections. They're so eager to fall in line that they're losing sight of this struggling valley's best interests.

The latest bit of public-sector peer pressure involves online travel agencies such as Orbitz and Expedia. Travel Web sites heavily promote Las Vegas and are instrumental in keeping Strip occupancy rates well above national averages, even in this recession. The businesses pay taxes on their huge room buys, but on the wholesale prices they pay to hotels, not the prices they charge customers.

The fact that these Web sites profit from the practice bothers tax-hungry politicians, who think they're entitled to the biggest cut possible. So a handful of cities and states have sued the online travel companies for what they claim are unpaid taxes -- and some of them are winning. In February, Anaheim, Calif., won $21.3 million, and last week, San Antonio won a $20.6 million award.

Even though state tax officials issued an opinion in 2005 that these Web-based outfits are not doing anything wrong, lawyers are whispering to cash-strapped commissioners that the lawsuit lottery is ripe for a payout. One attorney estimates that the state, county, the school district and the Las Vegas Convention and Visitors Authority could split between $200 million and $500 million in uncollected taxes (less attorney fees, of course).

"I don't know why anyone should feel uncomfortable with it," said Commissioner Chris Giunchigliani, who is bringing the matter before the board next week.

How about this: If the commission successfully extracts hundreds of millions of dollars from these companies, they'll have hundreds of millions of dollars less to buy Las Vegas hotel rooms. Government's short-term gain could be the economy's loss, replete with lower visitor volume, lower tax collections and more local layoffs.

"That's stepping over dollars to pick up pennies," said Chuck Bowling, MGM Mirage's vice president of marketing. "These companies are helping us to drive tourism ... in a way that we couldn't otherwise. We need all the faucets on."

Exactly. The commission needs to stop thinking about its own budget problems, which pale in comparison to those of the state's dominant industry. Suing primary drivers of tourist traffic will only make things worse for everyone.

 

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