The Problem The State of Illinois spends around $50 million per year on tourism. Revenue from the Hotel Operators’ Occupation Tax, which is 6 percent of 94 percent of gross rental receipts, funds tourism spending. Revenue from the hotel tax also goes towards the Build Illinois Fund, the Illinois Sports Facilities Fund, and the General Revenue Fund. Each year, the Department of Commerce and Economic Opportunity (DCEO) is responsible for disbursing tourism money to cities, counties, and other entities.
The DCEO claims the 2008 spring-summer tourism campaign “generated a 10:1 investment” and the 2009 tourism campaign “generated a $9 return on a $1 investment.” These figures are based on telephone surveys conducted by a private firm for the DCEO. It is common for state tourism agencies to boast a high return on investment, but economists caution that if these high rates of return were actually true, “such states could tax enough to spend themselves rich by allocating monies to tourism promotion.”
Tourism grants from the DCEO in recent years include:
$29,550 for a Lois Lane statue in Metropolis, Illinois.
$334,093 to Rockome Gardens for renovations including the addition of Amish cheese and ice cream production facilities.
$193,255 to the Illinois Grape Growers and Vintners Association to help maintain their website, host an educational conference, and promote their product.
$100,000 to the Municipal Clerks of Illinois for the International Institute of Municipal Clerks 2009 Conference.
$200,000 for the costs associated with hosting Fashion Focus Chicago 2009.
$32,681 for promotion of Fashion Focus 2008.
The Solution Illinois needs to prioritize spending on core government services. Illinois has a pension system underfunded by $83 billion and schools are waiting anxiously for payments from the state; funding a Lois Lane statue or contributing to Chicago’s fashion scene does not constitute a core government priority. Rather than giving special benefits to a few specific tourist attractions, Illinois needs to consider new avenues for attracting tourists, such as decreasing the cost of visiting Illinois by lowering taxes.
Why This Works Government spending should be focused on core government services rather than funding tourism activities and attractions. The economic benefits of tourism spending are usually highlighted, but the economic cost of the source of the funding—hospitality industry taxes—is often overlooked. The state should decrease the cost of visiting Illinois for all tourists by lowering the hotel tax. When families are tightening their belts during difficult economic times, making Illinois less expensive to visit will encourage more people to come here or stay longer during their visit. This would generate revenue without the government picking winners and losers in the tourism industry.
John Tillman discusses why the government needs to prioritize spending instead of picking the winners and losers of the tourism industry.