Do Lodging Taxes Maximize Tax Revenue? Evidence from Ten U.S. Cities

Authors

  • Joseph G. Eisenhauer University of Detroit Mercy

DOI:

https://doi.org/10.4316/rdt.38.723

Keywords:

lodging, tax revenue, monopolistic competition, state and local government, price elasticity

Abstract

Because taxes on lodging are generally not designed to correct market failure, their presumptive purpose is to maximize public revenue; we investigate whether they do so.  Using recent estimates of the price elasticity of demand for hotel rooms in ten major U.S. cities, we find that existing tax rates on lodging are generally below the revenue-maximizing tax rates for all but the most expensive luxury hotels.  On average, tax rates are 9 to 10 percentage points below the revenue-maximizing level.

Author Biography

Joseph G. Eisenhauer, University of Detroit Mercy

Joseph G. Eisenhauer is Professor of Economics and Dean of the College of Business Administration at the University of Detroit Mercy.

Downloads

Published

2024-12-31

Issue

No. 38 (2024)

Section

Articles

License

Revista de Turism: Studii si Cercetari in Turism (RDT) is an open access scholarly journal that allows free access to its content (articles, issues). RDT is available online to the readers without financial, legal, or technical barriers (no publication charges), based on the theory to keep an article's content intact. Authors can use Creative Commons licenses to specify usage rights of articles. Copyright of articles belong to authors.

Licenţa Creative Commons
This work is licensed under a Creative Commons Attribution License 4.0.