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House Republicans in Harrisburg consider increasing hotel tax by 5 percent

The latest proposal to end the Pennsylvania's stubborn budget stalemate could make Philadelphia and Pittsburgh's hotel taxes the two highest in the nation, according to industry figures.

Pennsylvania House Majority Leader Dave Reed (R., Indiana) said the proposed hotel tax could go a long way toward ending the stateÕs budget stalemate.
Pennsylvania House Majority Leader Dave Reed (R., Indiana) said the proposed hotel tax could go a long way toward ending the stateÕs budget stalemate.Read moreMATT ROURKE / AP

HARRISBURG — Philadelphia would be number one — Pittsburgh a close second.

In hotel taxes, that is.

The latest proposal to end Pennsylvania's stubborn budget stalemate could make hotel taxes in Philadelphia and Pittsburgh the highest in the nation, according to industry figures.

Republicans who control the House of Representatives late Tuesday afternoon began pushing a proposal to add a new 5 percent tax on hotel stays. That is on top of the current 6 percent statewide occupancy tax already slapped onto hotel bills — and above any local taxes that cities and counties, including Philadelphia and Allegheny County, impose.

Under the proposal, Philadelphia's hotel tax would rise to 21.25 percent starting next year, when a new city hotel tax takes effect. Those who book hotels in Allegheny County would pay 19 percent. That would place the two regions in the top two spots for hotel taxes in the United States, according to an analysis by HVS, an international hospitality-industry group.

"This is going to be devastating to our industry," said Ed Grose, executive director of the Greater Philadelphia Hotel Association, adding that such a tax would cost jobs and hurt the city's competitiveness in attracting conventions.

Added Craig Davis, president and CEO of VisitPittsburgh, Allegheny County's tourism promotion agency: "We are blindsided by this. It comes from out of nowhere."

As of late Tuesday, the proposal had passed out of a House committee and was being vetted by members behind closed doors. It was not clear when or whether it would come to a floor vote, although some thought that could happen as early as Wednesday.

Gov. Wolf and the legislature have been struggling for months to reach an agreement on a revenue package to fund the state's $32 billion budget and close a more than $2 billion deficit.

On Tuesday, tensions ran high as legislators worked to finalize a deal.

Late in the afternoon, minutes before a House committee was expected to address the hotel tax, House Speaker Mike Turzai (R., Allegheny) was spotted banging on a door to Wolf's office suite. Wolf was in Philadelphia attending a conference at the time and had not been scheduled to see Turzai.

Steve Miskin, a spokesman for House Republicans, said it is not uncommon for legislative leaders to arrive unannounced to see the governor. He said Turzai was anxious to clarify whether Wolf supported one of the budget's aspects. Miskin would not be specific.

"I don't think he was mad crazy," said Miskin. "He was anxious to get this thing resolved."

As the impasse has dragged on, the administration has been forced to take out a line of credit to pay its bills and delay some payments. Later this month, the state is scheduled to make a hefty payment to school districts that could again tax the state's cash-strapped coffers.

In the last week, Wolf and legislative leaders have met in private to craft a tentative revenue package to fund the budget that includes a mix of borrowing, expansion of gambling, and new or increased taxes.

A push to tax natural gas drilling companies was torpedoed last week by House Republican leaders, despite support from Wolf, the Senate, and Democrats and moderate Republicans in the House.

The hotel tax cropped up Tuesday afternoon after it became clear there wasn't enough support for a different levy: a tax on commercial warehouses. That would have impacted, among others, Amazon — a company whose second headquarters both Pittsburgh and Philadelphia are trying to lure.

The hotel tax is expected to bring in $96 million this year and $165 million next fiscal year, said House Majority Leader Dave Reed (R., Indiana). Reed told reporters Tuesday that the proposed hotel tax is "a major component" of the budget.

"I would say this is the component that has been holding up the budget process for some time now," said Reed.

Lobbyists and hotel-industry representatives said that news of the proposed hotel tax shocked them, and that elected officials had not contacted them to discuss the potential impact.

Said Grose: "I wonder if they know what our hotel tax is? Did they even bother to look?"